Nvidia’s biggest problem may soon get worse

25 years ago, chip manufacturing giant Nvidia (NVDA) introduced the GeForce 256, the world’s first graphics processing unit (GPU).

Nvidia’s GPU became the foundation for the big explosion of modern artificial intelligence that occurred a decade later. That’s what the company said in its October presentation to investors: “Today, the world recognizes GPUs not only for revolutionizing gaming, but as the driving force behind the AI ​​industrial revolution.”

In this presentation, it was also mentioned that Nvidia’s GeForce 256 ushered in an era in which gaming, computing, and artificial intelligence evolved together and fundamentally advanced entertainment technology and society; But these AI advances have recently run into trouble on Wall Street.

After nearing an all-time high on Oct. 14, Nvidia shares fell the next day on news that the company may impose further restrictions on its high-end chip exports.

US officials are considering restricting the sale of advanced artificial intelligence chips from Nvidia and other US companies to some countries, according to a report from Bloomberg News.

This idea has received more attention in recent weeks and is still in its early stages and is still under investigation.

The Biden administration has so far restricted the shipment of artificial intelligence chips to more than 40 countries in the Middle East, Africa and Asia due to concerns about the transfer of these technologies to China.

The policy is based on a new framework set up to ease the licensing process for sending AI chips to data centers in countries such as the UAE and Saudi Arabia.

Close cooperation ASML With Nvidia

It was a tough day for the chip industry; As stocks ended the day lower, the nearby index, which is mostly made up of technology companies, fell more than 1 percent. This comes after a disappointing report from European chipmaker ASML.

The report, which was leaked ahead of schedule, warned that demand would remain subdued in 2025 outside of the AI ​​sector.

ASML CEO Christophe Fouquet said in the company’s financial report: “Although there is still growth and great potential in the AI ​​sector, other market segments need more time to improve.” The improvement appears to be more gradual than previously anticipated.

Bypassing sanctions by Chinese developers

The Chinese have also found a way to use American chips. According to a Wall Street Journal report in August, Chinese developers are taking advantage of them without having to import the chips into China.

These developers work with middlemen to access processing power overseas and sometimes use techniques common in the cryptocurrency world to hide their identity.

In response to these restrictions, companies and intermediaries in Dubai and America have invested in purchasing servers equipped with Nvidia’s H100 chips.

According to him, the manager of one of these companies, these servers are located in Australia and help implement artificial intelligence algorithms for Chinese companies. “The demand is there,” he said. There is also profit. So, naturally, someone will meet this need.”

Meanwhile, the giants have said that export rules do not limit access to US cloud services that use Nvidia chips by Chinese companies or their foreign affiliates.