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The United States government has delayed granting export licenses to American chipmakers AMD (AMD) and Nvidia (NVDA) for shipping advanced artificial intelligence (AI) processors to several Middle Eastern countries.

The restrictions, imposed by the U.S. Commerce Department in October 2023, aim to address national security concerns surrounding the potential misuse of these high-performance computing (HPC) chips.

Export Restrictions and Targeted Countries
 

Under the new rules, export licenses are now required for shipments of advanced AI processors to China, Macau, Saudi Arabia, the United Arab Emirates (UAE), Vietnam, and other countries listed in the Commerce Department’s Group D:5. The targeted processors are crucial for AI training and HPC workloads.

Concerns have been raised about the possibility of these chips being resold to China or accessed by Chinese entities through cloud services. Such access could potentially enable the development of military equipment or the training of sophisticated AI models.

Middle East’s AI Ambitions and U.S. Partnerships
 

Saudi Arabia and the UAE have been investing heavily in AI to diversify their economies and become leaders in the field.

These countries view partnerships with U.S.-based companies, such as Cerebras and Nvidia, as crucial to their AI development plans. For example, Microsoft (MSFT) has invested $1.5 billion in the Abu Dhabi-based AI firm G42, highlighting the growing interest in AI collaboration between the U.S. and the Middle East.

However, Saudi Arabia has also partnered with China’s Lenovo to establish an R&D center in Riyadh despite being willing to separate Chinese supply chains. This collaboration has likely contributed to the U.S. government’s concerns about potentially transferring sensitive AI technology to China through Middle Eastern countries.

AMD Stock Down 2.5%
 

The export restrictions have significantly impacted the businesses of AMD, Nvidia, and other U.S.-based hardware developers by delaying or leaving unanswered their license applications for chip shipments to the Middle East. This has led to uncertainty and potential revenue losses for these companies as they navigate the complex geopolitical landscape surrounding AI technology.

As of 11:19 am EST on the market trading day, AMD’s stock price stood at $162.65, reflecting a decrease of 2.50%. Nvidia also saw a slight decline of 1.2% in the trading session so far.

AMD has a market capitalization of $262.893 billion, with a trailing P/E ratio of 241.67 and a forward P/E ratio of 47.62. AMD’s profit margin is 4.90%, and its return on equity is 2.01%. The chipmaker reported total revenue of $22.8 billion and a net income of $1.12 billion. AMD has total cash of $6.03 billion and a total debt-to-equity ratio of 5.34%.

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