The Biden Administration is planning to announce one last semiconductor chip curb on the Nvidia (NVDA) before leaving office next week. The news was first reported by Bloomberg, dragging down NVDA shares by 1.1% in extended trading yesterday. According to the report, the new curbs will be placed in a layered manner, with three levels of chip trade restrictions. The latest and last curb could be announced as soon as this Friday. The Biden administration has placed many such bans on the export of chips from Nvidia and AMD (AMD).
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Further Details of the Three-Tiered Chip Restrictions
Outgoing President Joe Biden is determined to control the spread of U.S.-made chips to China and Russia. Biden worries that the advanced AI chips can be misused and aid in pushing China’s military ambitions. Importantly, the limits will be placed on the use of data centers, since they are sometimes used for computing and running AI models even across borders.
The three-tiered chip restrictions have a limited number of U.S. allies at the top level, with countries in this group having unlimited access to U.S. tech and chips. The second level is a group of U.S. adversaries, who will be restricted from importing chips. Meanwhile, the last level, and the most crucial one, includes a majority of countries from the Middle East and South East Asia. These will face restrictions on the total computing power that can go to one country.
Having said that, the administration has put a process in place through which countries and even individual companies from the last level can bypass the restrictions. These VEU (validated end user) countries will require to adhere to stringent security requirements set by the U.S. government and comply with human rights standards.
Nvidia Balks at the Possible Last-Minute Curbs
Reverting to the possibility of the last-minute curbs, Nvidia openly expressed its objection. The company issued a statement saying that such last-minute restrictions to such a large number of countries would only hamper the U.S.’ economic growth and dominance in the chip industry. Nvidia emphasized that accelerated computing is the need of the hour, citing the requirement for such processing in everyday applications. The company contends that the U.S. can leverage its leading position in the AI realm instead of placing restrictions, which would ultimately not even stop the misuse.
Is Nvidia a Buy, Hold, or Sell?
Despite the growing chip export restrictions, analysts remain optimistic about Nvidia’s long-term growth potential. On TipRanks, NVDA stock commands a Strong Buy consensus rating based on 37 Buys and three Hold ratings. Also, the average Nvidia price target of $177.03 implies 26.4% upside potential from current levels. In the past year, NVDA shares have blasted 163.8%, propelled by the AI frenzy.
