With new China AI chip restrictions, U.S. takes aim at a critical niche

While the news shocked the chip sector by the time markets closed Thursday, sending the Philadelphia semiconductor index down 1.9% and Nvidia and AMD down 7.6% and 3% respectively, the letters from the U.S. officials appeared to target a narrow but critical part of China's computing industry. The regulations appear to focus on chips called GPUs with the most powerful computing capabilities, a critical but niche market with only two meaningful players, Nvidia and AMD. Their only potential rival - Intel Corp - is trying to break into the market but has not released competitive products. Originally designed for video games, the usage of GPUs, or graphic processing units, have been expanded to a wider array of applications that include handling artificial intelligence work like image recognition, categorizing cat photos or scouring digital satellite imagery for military equipment. Because all the chip suppliers are American, the U.S. controls access to the technology.