Shares of major chip makers Nvidia and AMD plunge amid fears of new US restrictions on sales of artificial intelligence chips to China.
Nvidia says the US government needs a new license effective immediately to eliminate the risk of the chips being "used or diverted for 'military purposes' in China and Russia."
There are concerns that this rule could result in millions of dollars in lost profits.
The stocks of both chip makers fell after the close of trading in New York.
Nvidia shares fell 6.6% and AMD shares fell 3.7%.
"We are taking a holistic approach to taking the additional actions required on technology, end use, and end users to protect U.S. national security and foreign policy interests," a Commerce Department spokesman said.
"This includes preventing China from acquiring and using US technology in the context of its civilian-military fusion program to fuel its efforts to modernize the military, violate human rights, and enable other malicious activities," the spokesman added.
In a U.S. regulatory filing Wednesday, Nvidia said "new licensing requirements" will affect the export of its A100 and H100 chips, which are designed to accelerate machine learning tasks, and systems that include them.
Nvidia added that sales to China could fall by around $400 million "if customers do not want to purchase alternative products from the company, or if (the US government) does not grant licenses in a timely manner or refuse to license significant customers."
Meanwhile, an AMD spokesperson said that regulations banning shipments of MI250 chips to China would not have a "material impact" on business.
Analysts say US demands could make it harder for China to acquire advanced computing chips.
It could also hurt profits for US manufacturers like Nvidia and AMD, said Mario Morales, an analyst at California-based market research firm IDC.
Both companies have strong ties to China and could see more impact in the future, especially if China decides to retaliate," Morales said.
Tensions between the world's two largest economies escalated earlier this month following US politician Nancy Pelosi's controversial visit to Taiwan.
China considers the self-governing island part of its territory and insists on uniting it with the mainland, if necessary by force.
