Fearing China, U.S. Blocks the Sale of Nvidia GPUs to the Middle East

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 The U.S. has put more curbs that block the sale of certain Nvidia GPUs to the Middle East, largely under fears that the technology will be accessible to China. 

The setback for Nvidia was revealed in the company’s 10K filing with the U.S. Securities and Exchange Commission.

In the filing, Nvidia stated that the U.S. government, in the most recent quarter, “informed us of an additional licensing requirement for a subset of A100 and H100 products destined to certain customers and other regions, including some countries in the Middle East.”  

Nvidia is already banned from selling the A100 and H100 GPUs to China because of export controls restricting U.S. companies from exporting advanced A.I. and chips. Nvidia devised the A800 and H800 versions of the chip for the Chinese market that played within the export control rules. 

The Nvidia H100 PCIe GPU

The U.S. is concerned about the close relationships between Middle Eastern countries and China. China had become a significant trade partner with Middle Eastern countries and helped broker a peace deal between rivals Saudi Arabia and Iran. 

According to the Carnegie Endowment for International Peace, China’s trade with the Middle East totaled $259 billion in 2021, growing from $180 billion in 2019.

China imports most of its oil from Saudi Arabia, and most Middle Eastern countries have awarded 5G telecom contracts to Huawei, which is on the U.S. ban list, according to data published by the U.S. government.

China has been a very important market for Nvidia, with a heavy talent base already familiar with the CUDA programming language used with Nvidia GPUs. In the past, Nvidia held the GTC conference in the Chaina and, in 2009, established the Chinese Academy of Sciences as a CUDA Center of Excellence.  

The Chinese Ministry of Education in 2011 put CUDA into the technology education syllabus. Every month, researchers at Chinese universities publish scientific research papers tested on the CUDA codebase. 

Nvidia is concerned about the long-term impact of restrictive trade practices imposed by the U.S. government but expects no more rules restricting the sale of the company’s products globally. 

“Given the strength of demand for our products worldwide, we do not anticipate that additional export restrictions, if adopted, would have an immediate material impact on our financial results,” Nvidia wrote in the filing. 

Nvidia’s GPUs are in big demand in China as no company has produced a competitive GPU. A Chinese company called Biren Technology is rumored to have developed a capable GPU for domestic use, though it would not match the performance of A100 or H100 GPUs. 

The China market generated $2.74 billion in revenue for Nvidia during the most recent quarter. Nvidia’s quarterly revenue was $13.5 billion, and China was the third largest market behind the U.S. and Taiwan. 

It was not clear which Middle Eastern countries faced export restrictions. A.I. chip company Cerebras struck a deal to install its systems in U.S. data centers run by UAE-based cloud provider G42. Cerebras said the agreement complies with the export restriction rules established by the U.S. government. 

Similarly, AMD in SEC filings, notes that the company is not allowed to sell its MI250 and MI250X high-performance GPUs to Chinese firms. 

Intel recently launched its Gaudi2 AI chip in China. The chip maker claims that the A.I. performance of Gaudi2 is comparable to Nvidia’s A100.