In a recent interview, sources revealed that officials in the Biden administration are contemplating measures to restrict NVIDIA and other American companies from selling high-end AI chips to certain countries in the Middle East. The focus is primarily on limiting these nations’ capabilities to develop AI technologies.

On October 14, NVIDIA saw its stock price rise by 2.4%, closing at $138.07 per share, marking a new high. The potential market for AI in the Middle East is expected to reach tens of billions of dollars, prompting concerns among investors about the implications of these restrictions on business expansion for key players like NVIDIA and AMD. Consequently, both NVIDIA and AMD experienced significant declines in early trading on October 15, with losses exceeding 5% and around 2.5% respectively for AMD.

According to Bloomberg, the Biden administration’s new approach involves placing export license limits on specific countries, driven by national security considerations. Officials are particularly focused on Gulf nations, which have shown increasing interest in AI data centers and possess substantial financial resources.

Targeting specific countries with sales restrictions will broaden the scope of previously established limits aimed solely at countering China’s AI ambitions, highlighting the U.S. belief that global AI developments pose security risks. The Biden administration has already imposed restrictions on over 40 countries in the Middle East, Africa, and Asia regarding the export of AI chips from companies like NVIDIA and AMD, citing concerns over these products potentially being rerouted to China.

Moreover, some U.S. officials believe that semiconductor export licenses can serve a broader diplomatic agenda, particularly regarding the sale of NVIDIA chips. This may involve persuading major corporations to minimize their ties with China in exchange for continued access to American technological resources.

Sources indicate that discussions surrounding this issue are in the early stages and not yet finalized. However, progress has been made in recent weeks. This policy would create a new framework to simplify the licensing process for AI chip sales to data centers in countries like the UAE and Saudi Arabia. Last month, officials from the U.S. Department of Commerce announced these regulations and indicated that more rules would be forthcoming.

The Bureau of Industry and Security within the Commerce Department declined to comment on the matter. NVIDIA and AMD did not provide comments, while Intel did not respond. A spokesperson for the National Security Council at the White House also refrained from commenting on the discussions but referenced a recent joint statement on AI between the U.S. and the UAE, which acknowledged the “immense potential” of AI and the importance of protective measures concerning the challenges and risks associated with this emerging technology.

Governments worldwide are striving for what is referred to as “sovereign AI,” meaning the capability to develop and operate their own AI systems. According to NVIDIA CEO Jensen Huang, this objective is a primary driver of demand for NVIDIA’s advanced processors. NVIDIA’s chips are regarded as the gold standard for data center operators, cementing the company’s position as the world’s highest-valued chipmaker, benefiting from the current surge in AI interest.

Simultaneously, China is advancing its own semiconductor capabilities. Although it still lags behind the U.S., American officials are concerned that if Huawei ever succeeds in producing a substitute for NVIDIA chips, it could undermine America’s hold on the global AI landscape.