As a result, shares of Nvidia (NASDAQ: NVDA) experienced a decline of over 2%, while Advanced Micro Devices(NASDAQ: AMD) saw a drop of approximately 1.5% in after-hours trading.*

The Department of Commerce is said to be planning to halt the shipment of chips produced by Nvidia and other chip manufacturers to Chinese customers as early as July. This move further intensifies the ongoing tensions between China and the Biden administration, with Nvidia, Micron (NASDAQ: MU), and AMD finding themselves caught in the crossfire.

In September of the previous year, Nvidia disclosed that it had been requested by U.S. officials to cease exporting two high-performance computing chips used for AI work to China. Subsequently, the company, under the leadership of Jensen Huang, announced its plans to introduce a new advanced chip called the A800 in China to comply with export control regulations. Furthermore, Nvidia made modifications to its flagship H100 chip earlier this year to ensure compliance.

However, the proposed restrictions being considered by the Department of Commerce would prohibit the sale of A800 chips to China without a special U.S. export license, as per the report. At the time of reporting, the Commerce Department had not provided an immediate response to Reuters' request for comment.

Chart 1 the development of NVIDIA shares over five years* 

Chart 2 the development of AMD shares over five years*

* Past performance is no guarantee of future results