Is this any way to celebrate your birthday?
It was 25 years ago this year when chipmaking giant Nvidia (NVDA) unleashed GeForce 256, the world’s first GPU, or graphics processing unit, upon humanity.
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"Nvidia’s GPU set the foundation for the Big Bang of modern AI, a decade later," the company said in its October investor presentation. "Today the world recognizes GPUs not only for reshaping gaming but also for powering the AI industrial revolution."
"Nvidia Geforce 256 started an era where gaming, computing and AI evolved together, fundamentally advancing entertainment technology and society," the presentation said.
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The AI advance recently took a bad turn on Wall Street.
After nearing an all-time high on Oct. 14, Nvidia shares fell the following day on news that the company's advanced-chip exports could be up against more restrictions.
U.S. officials have discussed limiting sales of advanced AI chips from Nvidia and other American companies on a country-specific basis, Bloomberg News reported, citing people familiar with the matter.
The idea has gained traction in recent weeks and deliberations are in early stages and remain fluid.
The Biden administration has restricted AI-chip shipments by companies like Nvidia and AMD to more than 40 countries across the Middle East, Africa and Asia over fears their products could be diverted to China.
The policy would build on a new framework to ease the licensing process for AI-chip shipments to data centers in places like the United Arab Emirates and Saudi Arabia.
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ASML works closely with Nvidia
Overall, it was a pretty tough day for the chip brigade.
Stocks ended lower, with the tech-heavy Nasdaq falling more than 1% in the late hours of the session following a grim third-quarter update from European chip equipment maker ASML (ASML) .
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The report, which was leaked ahead of schedule, warned that the demand heading into 2025, outside of AI, would remain muted.
“While there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover,” CEO Christophe Fouquet said in the company’s earnings report. “It now appears the recovery is more gradual than previously expected.”
ASML makes much of the equipment used to make the high-tech AI chips and works closely with Nvidia.
"The big issue is that ASML's bookings for the September quarter were down sharply compared to the June quarter," TheStreet Pro's Chris Versace said. "And that's raising some questions."
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Last month, the U.S. Commerce Department unveiled a rule that could ease shipments of artificial intelligence chips like those from Nvidia to data centers in the Middle East, Reuters reported.
Under the new rule, data centers will be able to apply for Validated End User status, which will permit them to receive chips under a general authorization, rather than requiring their U.S. suppliers to obtain individual licenses to ship to them.
Meanwhile, China's tech watchdogs, the Cyber Security Association, said Intel (INTC) chips should be subject to an intense review in order to “safeguard China's national security and the legitimate rights and interests of Chinese consumers.” It's the latest tit-for-tat move in a broader trade war with the U.S.
And Chinese AI developers have found a way to use the most advanced American chips without bringing them to China, The Wall Street Journal reported in August, just ahead of Nvidia's second-quarter earnings report.
China gets access to Nvidia chips
In response to U.S. export controls, the developers are working with brokers to access computing power overseas, sometimes masking their identity using techniques from the cryptocurrency world.
The Journal report cited Derek Aw, a former bitcoin miner, who persuaded investors in Dubai and the U.S. to fund the purchase of AI servers housing Nvidia’s powerful H100 chips.
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In June, Aw’s company loaded more than 300 servers with the chips into a data center in Brisbane, Australia. Three weeks later, the servers began processing AI algorithms for a company in Beijing.
“There is demand,” Aw said. “There is profit. Naturally someone will provide the supply.”
The buyers and sellers of computing power and the middlemen connecting them aren’t breaking any laws, lawyers familiar with U.S. sanctions said.
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Cloud companies said the export rules don’t restrict Chinese companies or their foreign affiliates from accessing U.S. cloud services using Nvidia chips.
In platforms that Aw and others use, the billing and payment methods are designed to give the participants a high degree of anonymity.
The process extends the anonymity of cryptocurrency to the contract itself, with both using the digital record-keeping technology known as blockchain.
Aw said even he might not know the real identity of the buyer. As a further mask, he and others said Chinese AI companies often make transactions through subsidiaries in Singapore or elsewhere.
“Since late last year, there has been a significant increase in the number of Chinese customers on our platform,” Aw told the Journal. “I often get asked if we have Nvidia’s chips.”
Nvidia shares were up 1.8% near $134 at last check.
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