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Chip stocks tumbled pre-market, led by shares of Nvidia, after a US official confirmed that exports of the company's A800 and H800 chips will be restricted for sale to China, Bloomberg reports. The chips were specifically created for export to China following restrictions introduced by the Biden administration in October of 2022.

The rules restrict exports of chips to foreign arms of companies headquartered in China, Macau and other regions – however chips designed for consumer applications such as gaming, smartphones or laptops are not subject to the requirement.

According to report, the US Treasury Secretary, Commerce Secretary and National Security Advisor all notified China that the update to the Oct 2022 rule on chips and chip tools would impact exports of said newer chips.

NVidia was down as much as 12% pre-market following the announcement.

As we noted on Friday, Reuters reported that the Biden administration was targeting a loophole that has allowed developers in China to purchase chips from the infamous Huaqiangbei electronics area in Shenzhen, a city in southern China.

The sources reportedly claim that the additional rules on AI chips will come out this month and will apply restrictions previously applied only to the U.S.’s top players like Nvidia and AMD but more broadly to all companies producing similar materials in the market.

Over the summer, the U.S. government applied additional rules to its largest chip makers, including Nvidia, which currently leads the market in chip manufacturing. It asked the companies to curb exports of their high-level semiconductor chips to “some” Middle Eastern countries, among other small details.

The majority of Nvidia’s revenue comes from the U.S., China and Taiwan, while less than 14% comes from all other countries combined.

Reuters' sources have said that the Biden administration is also trying to troubleshoot a loophole that allows Chinese parties access to U.S. cloud service providers like Amazon Web Services (AWS). According to the report, those solutions seem “less clear.”

In July, U.S. officials reportedly began their considerations on restrictions on access to cloud computing services such as AWS by Chinese companies in an effort to safeguard the country’s advanced technology.

The U.S. implemented its initial export controls on its most powerful semiconductor chip technology in October 2022.

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