US President Joe Biden enacted a new ban for chip sales to China, hurting US stock performances.
NVIDIA stocks tumbled 3% on Wednesday morning in New York as the US-China chip war got more intense. Last month, amid the latest AI market craze, NVIDIA passed $1 trillion market valuation.
NVIDIA is the world’s leading chip designer, whose products are featured in the vast majority of tech devices around the globe.
NVIDIA chips are designed in the United States and manufactured in Taiwan, an independent island off the shores of China.
Taiwan is, coincidentally, also the fulcrum of the world’s geopolitics, as Beijing claims the whole island as part of its core territory. On the other hand, the United States pledged to defend Taiwan in case of Chinese aggression.
American businesses and Chinese entrepreneurs both suffered from the US-China trade war, initially started by former US president Donald Trump and continued by Joe Biden.
The Biden administration, as well as the overall American high command, believes China will not attack Taiwan as long as the island retains chip manufacturing superiority.
92% of the world’s chips are manufactured in Taiwan. Taiwanese chips are the core product of most advanced economies, including China.
China has tried for decades to start their own chip manufacturing, but so far only managed to lag behind Taiwanese technology. One single chip factory is wildly expensive and requires sophisticated materials, expertise and industrial secrets, which Taiwan jealously guards.
Biden’s new ban
Another major barrier to entry for Chinese chipmakers is modern and advanced designs. Taiwanese chips follow American-designed blueprints, and the Biden administration worries they might spill over to China.
The Chinese market amounts to one-fifth of NVIDIA’s total revenues. It makes complete business sense for NVIDIA to share its chip blueprints with China, but the US government is trying to prevent it.
Currently, NVIDIA is banned from shipping its most advanced chip (the A100) to China.
According to the Wall Street Journal, the Biden administration will extend the ban to the A800 and H100 chips as well. The upcoming restrictions should be enforced starting in July.
NVIDIA is not the only US tech company suffering from the trade war. Recently, tech entrepreneur and billionaire Elon Musk flew to China to exploit EV (electric vehicles) market opportunities.
JPMorgan Chase CEO Jamie Dimon said relationships between the United States and China should normalize again, or both countries will suffer in the long run.
But tensions between the world’s most powerful countries keep mounting. Recently, US Secretary of State Antony Blinken flew to China for a round of talks, but came back empty-handed.
A new cold war would disrupt the global economy, and could also lead to something much much worse for humankind.
