Daily: More on chip controls; Nvidia shares fall 8.5%; More on data centres
7.5 min read.
Highlights
Back and forth on chip controls. Microsoft calls for a review of the three-tiered AI Diffusion Rule that the Biden admin implemented in the last days of the administration. Microsoft argues that friendly and allied countries in the second tier (some restrictions), like India and Israel, should be moved up to the first tier (no restrictions). They argue that those countries might instead turn to China to get the infrastructure they need.
Meanwhile, the nominee for the Undersecretary of Commerce for industry and security said it was “critical to ensure that we have strong enforcement” of chip controls at his nomination hearing. At the same time, Biden’s Assistant Secretary of Commerce for export enforcement said there are rolled-over investigations that he expects to be resolved with aggressive enforcement in 2025.
Nvidia shares fall. I wrote yesterday that “Nvidia stock is roughly flat [in after-hours trading] and down 5% for 2025 so far.” I spoke too soon. It’s down ~8.5% and Japanese, Korean, and Taiwanese chip stocks also fell on the news. Tokyo Electron is down 5.5%, SK hynix is down 4.8% and Foxconn is down 4.3%.
On a more positive note, the WSJ reports that Nvidia is strategically shifting their chips’ strengths to focus more on inference (rather than training).
Various data centre news. Data centre operator CoreWeave preparing to IPO sometime this year for a US$35+ billion valuation.
Meanwhile, Meta is raising US$35 billion to build more data centres in the U.S. through private credit.
And new startup, which makes data centres more energy efficient, has emerged from stealth.
Thanks for reading.
1. Policy and Geopolitics
1.1
WSJ (02/27): Microsoft Urges Trump to Overhaul Curbs on AI Chip Exports
Microsoft is pushing the Trump administration to loosen and simplify a new system that would restrict the sales of cutting-edge U.S. artificial-intelligence chips to much of the world.
In a blog post Thursday, Microsoft called for Trump’s team to ease the limits on chips that can be used in data centers for training AI models so they no longer apply to a group of U.S.-friendly nations including India, Switzerland and Israel. Those countries are in the second tier of a three-tier system that underpins the export controls.
Microsoft says the unintended consequence of that proposed system would be that countries facing limited U.S. chip supply would turn to China to get the tech infrastructure they need.
1.2
Bloomberg (02/28): Singapore Charges Three After Probe Into Nvidia Server Fraud
Singaporean police charged three men for allegedly defrauding an unnamed supplier of computing servers, casting a spotlight on local intermediaries’ role in funneling Nvidia Corp. chips around the world.
The case centers on whether the trio played a role in misleading the server supplier, including by misrepresenting the actual end-user of the hardware, according to their charge sheets. Two Singaporean men, 41 and 49, were charged for criminal conspiracy to commit fraud, while a Chinese national, 51, was charged for committing a fraud.
The case comes weeks after Bloomberg News reported that the US was investigating whether Chinese artificial intelligence sensation DeepSeek had circumvented US chip sanctions with help of third parties in Singapore. Local media including the broadcaster CNA reported that the arrests were linked to the shipment of Nvidia chips to China.
1.3
Reuters (02/28): Report of TSMC chips that went to Huawei 'huge concern,' US Commerce nominee says
U.S. President Donald Trump's nominee to a post overseeing export policy on Thursday called reports about Taiwan Semiconductor Manufacturing Co producing hundreds of thousands of chips that went to China's Huawei, a "huge concern."
Jeffrey Kessler, Trump's pick for under secretary of commerce for industry and security, was asked at his nomination hearing before the Senate Banking Committee about the reported illegal shipments of chips and his approach to export control policy and improved enforcement.
"This is obviously a huge concern," Kessler said. "It's critical to ensure that we have strong enforcement."
1.4
Reuters (02/28): Big fines coming for US export violations, says ex-Commerce official, as China sales probed
The U.S. Commerce Department is likely to impose hefty fines on companies in the coming months for illegally shipping technology to customers in countries like China, a top department official who left last month said on Thursday.
Matthew Axelrod, as Commerce's assistant secretary for export enforcement during the Biden administration, pushed for tougher penalties against companies that violated export controls on China, Russia and Iran.
He signed off on a $300 million penalty on Seagate Technology in 2023 for shipping 7 million hard drives to China's Huawei, which is on the U.S. Commerce Department Entity List that restricts sending U.S. goods and services to the company because of its risks to national security.
"We had hoped some major investigations would resolve in 2024, but it looks like it will now be 2025," said Axelrod, who expects the Trump administration to aggressively enforce export controls.
2. Economy, Finance, and Business
2.1
Bloomberg (02/28): Asian Chip Shares Tumble on Nvidia Earnings, Tariff Fears
A Bloomberg gauge of 25 Japanese chip-related stocks sank as much as 4.5%, the biggest intraday fall since September, led by 12% fall in Disco Corp. Advantest Corp plunged as much as 10% while Tokyo Electron lost 5.5% at one point.
In South Korea, SK Hynix Inc. and Samsung Electronics Co. tumbled 4.8% and 2.3% respectively, while Taiwan’s market was closed for a holiday. In China, Nvidia supplier Foxconn Industrial Internet drops as much as 4.3% while Hong Kong-listed Sunny Optical shed 5%.
Nvidia, the chipmaker at the center of an AI spending boom, sank 8.5% in New York after warning that gross profit margins would be tighter than anticipated.
2.2
WSJ (02/27): How Nvidia Adapted Its Chips to Stay Ahead of an AI Industry Shift
Nvidia faced a growing threat early last year: The artificial-intelligence world was shifting in a way that invited competition… Many expected that shift could give competitors, including Advanced Micro Devices, an opening to pry away market share.
But Nvidia was already preparing to adapt and stay at the forefront of the AI race despite the shift away from creating models and toward operating them, a process known in the industry as “inference.”
Its latest AI chips, called Blackwell, are larger in size, have more computer memory and use less-precise numbers in AI computations. They can also be linked together in large numbers with superfast networking, which Dylan Patel, the founder of industry research firm SemiAnalysis, said led to “breakthrough gains” in inference.
“Nvidia’s performance gains for Blackwell are much larger in inference than they are in training,” he said.
2.3
FT (02/28): Data centre operator CoreWeave lays groundwork for IPO
Data centre operator CoreWeave is preparing to file for an initial public offering as early as next week that would value the company at more than $35bn and is expected to be one of the biggest artificial intelligence listings of the year.
The New Jersey-based start-up is aiming to raise $4bn from the IPO. A former cryptocurrency mining operation, it was an early and prolific buyer of Nvidia’s graphics processing units (GPUs), with about 300,000 of the chips that are now the world’s hottest commodity for powering AI models.
CoreWeave executives have begun meetings with investors this week to test the water on appetite for its IPO, according to people close to the process. Morgan Stanley, Goldman Sachs and JPMorgan are advising on the deal. The people said details and the timing of the IPO plan were still subject to change. CoreWeave declined to comment.
2.4
Bloomberg (02/28): Meta in Talks to Raise $35 Billion for Data-Center Financing Led by Apollo
Apollo Global Management Inc. is in talks to lead a roughly $35 billion financing package for Meta Platforms Inc. to help develop data centers in the US, according to people with knowledge of the matter.
The alternative asset manager has discussed providing a major part of the financing, said the people, who asked not to be identified because the information isn’t public. KKR & Co. is also a part of the investor group, one of the people said.
The funding conversations are at an early stage and there’s no guarantee a deal will be completed.
2.5
Axios (02/27): Data center energy startup emerges from stealth
The startup Claros will emerge from stealth Thursday with $9.75 million in funding to commercialize tech that cuts energy loss at data centers.
State of play: Claros' goal is "reinventing how energy flows from the grid to the chip," founder and CEO Dan Kultran said in a statement.
Why it matters: AI and other computing needs can strain local grids and make decarbonization tougher, while wasted energy raises hyperscalers' costs.
2.6
TrendForce (02/28): Korean HBM Giants Cutting Chinese EDA Risks Higher Costs, Supply Chain Disruptions
South Korean memory giant SK hynix, amid potential U.S. restrictions, is conducting an urgent review of Chinese EDA software, a move Samsung may likely follow suit.
However, U.S. EDA costs twice as much as Chinese alternatives, dropping Chinese EDA would increase Samsung and SK hynix’s reliance on U.S. suppliers, raising design costs.
The global EDA market is dominated by tech giants based in the U.S. and Europe. According to TrendForce, in 2024, Synopsys, Cadence, and Siemens EDA account for 32%, 29%, and 13% of the market respectively, for a total 74% market share.
3. Technology
3.1
SCMP (02/28): Hong Kong embraces RISC-V open-source chip design to secure spot in China semiconductors
Hong Kong is betting on the RISC-V open-source chip architecture to drive innovation and secure a position in China’s semiconductor landscape amid escalating US chip restrictions.
The city, which is planning to host the International Young Scientist Forum on Artificial Intelligence, is promoting research in AI and open-source technology, particularly RISC-V, Finance Secretary Paul Chan Mo-po said in his 2025 budget address on Wednesday.
Last month, a team from the Chinese Academy of Sciences (CAS), a top government research organisation, announced that it would deliver its RISC-V-based XiangShan CPU this year. The team said earlier this month it had adapted XiangShan to support DeepSeek-R1, the popular open-source reasoning large language model developed by Hangzhou-based AI start-up DeepSeek.
China is doubling down on RISC-V this year, with several large conferences based around the technology. Shanghai will host a RISC-V summit in July, the city announced earlier this week.
3.2
WSJ (02/27): Amazon Unveils Its First Quantum Computing Chip
Amazon.com’s cloud-computing business on Thursday unveiled its first-ever quantum computing chip, which it claims marks an important step in the development of useful, reliable quantum computers.
The chip, dubbed Ocelot, can lower the costs of reducing quantum computing errors by up to 90%, the Seattle-based tech giant said.
Amazon Web Services’ announcement comes just a week after Microsoft claimed a quantum computing breakthrough by creating a new state of matter. Google in December said it developed a new chip, called Willow, that it said marks an advance in solving quantum’s error-correction issues.