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28 Jun, 2023 15:32

Chinese tech stocks drop on US chip export crackdown rumors

Washington is reportedly mulling new export controls on microprocessors used for artificial intelligence
Chinese tech stocks drop on US chip export crackdown rumors

Shares in Chinese companies focused on artificial intelligence (AI) saw a decline on Wednesday after a media report alleged that US authorities were contemplating new export controls on microchips to the country.

China’s CSI artificial intelligence index slid 3% on the report. Shenzhen-traded shares of Inspur Electronic Information Industry lost 10%, while Chengdu Information Technology fell nearly 8%.

Meanwhile, Hong Kong-listed shares in retail giant Alibaba, which recently launched its own version of the popular chatbot ChatGPT, edged down 1.6%. Shares in Tencent, focused on building its own AI model, shrank 1.58%.

The Financial Times and Wall Street Journal, citing sources familiar with the matter, have reported that the Biden administration may close loopholes in the sale of powerful chips used to develop AI in China. The move is expected to dent sales in the world’s top semiconductor market.

The step underscores Washington’s intentions to contain China’s technological rise and may escalate the tensions between the world’s two biggest economies.

The move, which could happen as early as July, will significantly affect major US chip manufacturers such as Nvidia, which produces graphics chips vital for driving the technology behind OpenAI’s ChatGPT and Alphabet’s Bard chatbots.

The US Commerce Department could “stop the shipments of chips made by Nvidia and other chip makers to customers in China and other countries of concern without first obtaining a license,” the WSJ reported.

Shares in Nvidia, which generates about a fifth of its revenue from China, slid 4.6% in premarket trading on Wall Street, while stocks of its rival Advanced Micro Devices dropped around 3.7%.

The US government is also preparing to issue an executive order on screening China-bound investment, in a bid to reduce the odds that US technology will help support the Chinese military.

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