AMD and Nvidia are being hit hard by the US government’s announcement of new restrictions on the export of AI semiconductor chips to China and some other countries. The move will prevent the two companies’ advanced AI chips from being exported to the region, and is in line with the US’s efforts to maintain its technological edge.

AMD said in an SEC report filed on the 16th that it expects to lose about $800 million in inventory, purchase contracts, and related reserve funds due to this increased regulation.

In the report, AMD explained, “The company has completed an initial assessment of the new licensing requirements and that they apply to the MI308 product,” and “We plan to apply for a license, but there is no assurance that it will be approved.”

Nvidia is also set to report a massive loss of up to $5.5 billion as its Nvidia H20 chip falls under new regulations. Both companies have developed AI GPUs designed to meet regulatory requirements in advance, but the White House’s updated restrictions mean they can no longer offer them without an export license.

The U.S. Department of Commerce explained the reason for the restrictions, telling Reuters that it was “a measure taken at the direction of the President to ensure national and economic security.”

These restrictions are expected to make it difficult for Chinese companies to secure the chips needed to train AI models.

On the other hand, these sanctions and regulations are proving to be generally limited in their effectiveness.

There have already been reports of sanctioned chips such as the Nvidia H200 being smuggled into China, with active intermediary trade taking place through neighboring countries such as Malaysia, Vietnam, and Taiwan.

While the Singapore and Malaysian governments have taken steps to reduce the leaks of these AI chips, it remains unclear how effective they will be in curbing black market demand in China.