Nvidia stock (Nasdaq: NVDA) fell by over 4% in this morning’s trading session following reports that the Biden administration may impose what amounts to a quota system for the global sale of artificial intelligence chips.
The proposed regulations, first reported by Bloomberg, would establish a three-tier system of markets.
Inside the Biden Administration AI Chip Plan
Under the potential new regulations, U.S. allies would enjoy largely unrestricted access to AI chips made by American companies such as Nvidia and Advanced Micro Devices (AMD).
In the middle tier would be the majority of countries in Eastern Europe, Asia, Africa, and South America, which would face semi-restricted access.
China, Russia, and other U.S. adversaries and rivals would see the most severe limitations.
Through the quota system, the Biden administration aims to counter China’s use of companies to circumvent existing restrictions by re-exporting sensitive chips from third-party countries, such as Malaysia, Singapore, and even Taiwan.
Nvidia Responds
Nvidia strongly criticized the proposal, stating:
“A last-minute rule restricting exports to most of the world would be a major shift in policy that would not reduce the risk of misuse but would threaten economic growth and U.S. leadership.”
Beginning in October 2022, Nvidia has complied with U.S. export controls, ceasing sales to China of its A100, H100, and GH200 AI chips.
Nvidia’s latest AI chip, the Blackwell, is currently in production.
Company founder and CEO Jensen Huang has yet to meet President-elect Donald Trump, who takes office later this month, but has expressed his readiness to do so.
Why It Matters: Rising Geopolitical Risk for AI Chip Companies
A quota system could severely disrupt Nvidia’s global revenue streams, which make up a majority, albeit declining, share of its sales, falling from 84% in 2022 to 56% in 2024.
China is Nvidia’s third-largest market, generating over $10 billion in revenue during the 2024 fiscal year, accounting for a substantial 16.9% of Nvidia’s total annual revenue, though down from 26.4% in 2022 and 21.4% in 2023.
Nvidia Revenue By Geographic Area
| Revenue (In Millions) | FY 2024 | FY 2023 | FY 2022 |
|---|---|---|---|
| United States | $26,966 | $8,292 | $4,349 |
| Taiwan | $13,405 | $6,986 | $8,544 |
| China (Including Hong Kong) | $10,306 | $5,785 | $7,111 |
| Other Countries | $10,245 | $5,911 | $6,910 |
| Total Revenue | $60,922 | $26,974 | $26,914 |
Retaliatory Measures By China
China has also retaliated to U.S. sensitive technology export restrictions by banning the export of critical minerals such as gallium and germanium, which are essential for the manufacturing of certain semiconductors and advanced electronics.
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