US officials have ordered US chip designer Nvidia to halt exports of two top computing chips for artificial intelligence to China, potentially crippling Beijing's ability to carry out advanced work like image recognition.

The ban will entail A100 and H100 chips, which are made to speed up machine learning tasks, and could interfere with the development of the H100, a flagship chip that the company announced this year. 

The US officials told Nvidia that the new rule “will address the risk that the covered products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China.”

Remarking on the matter, a spokesperson for the US Department of Commerce said: “While we are not in a position to outline specific policy changes at this time, we are taking a comprehensive approach to implement additional actions necessary related to technologies, end-uses, and end-users to protect US national security and foreign policy interests."

This could be interpreted as a major escalation in the series of US crackdowns on China's technological industries against a backdrop of tensions over Taiwan, where Nvidia's chips are manufactured.

The ban does not stop at Nvidia, as major chip manufacturer AMD is experiencing similar restrictions. An AMD spokesperson told Reuters that the company received new license requirements which will stop its MI250 AI chips from being exported to China. However, it believes its MI100 chips won't be affected. 

Without AMD and Nvidia's chip exports to China, Chinese firms will be unable to cost-effectively carry out advanced computing for image and speech recognition technologies, in addition to other tasks.

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Image and speech recognition are common and integral in smartphones, as they can answer questions or requests, and tag pictures, in addition to their military uses, like scouring satellite imagery for weapons or bases and filtering digital communications for intelligence. 

Before this decision, Nvidia booked $400 million in microchip sales to China, which will be lost if China decides not to buy alternative Nvidia products.

Nvidia, furthermore, said it seeks exemptions from the rule while believing that there is no assurance that US officials will give any.

Disruption of the global supply chain

Washington's move is the latest in the disruption of the global supply chain for microchips, which has been suffering from a global shortage lately.

This month, US President Joe Biden signed a landmark bill - the CHIPS and Science Act of 2022 - which will allocate $52.7 billion to subsidize semiconductor production and research in a bid to boost incentives to make the US more competitive with China's science and technology efforts. 

The act not only holds the purpose to compete against China's technological innovation and market, but also a more troublesome role: According to Chinese foreign ministry spokesperson Wang Wenbin, the bill will disrupt global supply chains and hamper international trade. 

"The United States stated that the act aims to increase the competitiveness of US technologies and the semiconductor production, however this act provides huge subsidies to US enterprises producing chips and introduces a differentiated policy of industry support, some provisions of which, among other things, restrict the normal investment and trade and economic activities of relevant Chinese enterprises, as well as normal scientific and technical cooperation between China and the US," Wang explained at a briefing. 

The Chinese Embassy in Washington said Beijing "firmly opposed" the bill as it strikes as a "Cold War mentality."

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