The U.S. Commerce Department today imposed export restrictions on about 80 companies, including more than 50 that are based in China. 

According to the New York Times and the Wall Street Journal, at least two of the affected firms have used Nvidia Corp. chips in their products. The new restrictions will prevent the firms from procuring those chips going forward. Shares of Nvidia and several other major chipmakers declined on the news.

The move was announced by the Bureau of Industry and Security, or BIS, a Commerce Department office tasked with enforcing trade controls. The 80 companies affected by the move are now on the agency’s Entity List database of organizations subject to export restrictions. Companies are added to the list by an interagency committee that includes representatives from the Commerce, Defense, State, Energy and Treasury departments. 

“The Entity List is one of many powerful tools at our disposal to identify and cut off foreign adversaries seeking to exploit American technology for malign purposes,” said Jeffrey Kessler, the Under Secretary of Commerce for Industry and Security. 

According to BIS officials, 11 of the Chinese companies to which the new export restrictions apply focus on artificial intelligence. The firms develop advanced AI, high-performance AI chips and supercomputers for “China-based end-users with close ties to the country’s military-industrial complex.”

Two other Chinese firms were added to the Entity List for selling products to companies already in the database, notably Huawei Technologies Co. and its chip business. Another seven organizations were added because they attempted to procure U.S.-origin products for use in China’s quantum computing initiatives.

According to the New York Times, Chinese AI server maker Nettrix is among the companies to which the new export restrictions apply. It was founded by former executives from another Chinese tech firm that has been on the Entity List since 2019. Nettrix reportedly formed ties with Nvidia, Intel Corp. and Microsoft Corp. following its launch a few years ago.

The Commerce Department also added six subsidiaries of Inspur Group, China’s largest server maker, to the Entity List. The Journal reported that the company is a major customer of Nvidia chips.

The Biden administration implemented export restrictions that prohibit the sale of Nvidia’s most advanced AI processors to China. As a result, the company sells significantly scaled-down versions of its chips to Chinese customers. One of the Inspur Group subsidiaries affected by today’s export restrictions, Inspur Electronic, reportedly makes AI systems that incorporate the scaled-down Nvidia chips.

Inspur Group owns one third of Inspur Electronic. The latter company, in turn, wholly owns a U.S.-based firm called Aivres Systems. Aivres reportedly sells AI systems that use Nvidia’s most advanced processors rather than the scaled-down versions. The company is believed to have customers in the U.S., Japan and other markets. 

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