Oracle Corp, in its pursuit of gaining ground in the cloud computing industry, is reportedly investing “billions” of dollars in Nvidia Corp chips. The company aims to strengthen its cloud division and compete against major rivals such as Amazon Web Services and Microsoft Corp.

Oracle’s focus on building fast networks to handle vast amounts of data required for AI systems, similar to ChatGPT, has led to the acquisition of graphics processing units (GPUs) for efficient data processing.

AI Chip Investments by Oracle

Oracle founder and Chairman Larry Ellison revealed that the company is making substantial investments in Nvidia chips as well as central processor units (CPUs) from Ampere Computing, a chip startup in which Oracle has also invested, and Advanced Micro Devices Inc (AMD). Ellison emphasized that Oracle’s expenditure on CPUs will be three times that of GPUs, demonstrating their commitment to traditional computing.

Partnerships and Acquisitions

Oracle recently struck a deal with Cohere, an AI startup founded by ex-Google engineers. As part of the agreement, Cohere’s AI software will run on supercomputers equipped with up to 16,000 Nvidia chips inside Oracle’s data centers. Additionally, other companies like CoreWeave are also targeting AI-focused businesses by providing cloud hardware heavily reliant on Nvidia chips.

Impact of Export Controls on Nvidia

Export control restrictions imposed by the U.S. on the export of AI chips to China may lead to long-term consequences for Nvidia. Although the company expects no immediate material impact, Nvidia’s Chief Financial Officer, Colette Kress, expressed concerns about the permanent loss of opportunities for the U.S. industry. The potential ban on the sale of Nvidia’s data center GPUs to China would hinder the ability to compete and establish a foothold in one of the world’s largest markets.

Challenges for U.S. Chipmakers

Nvidia is not the only chipmaker facing challenges in the U.S.-China technology dispute. The U.S. government is considering tighter export control rules that may further restrict the sale of AI chips to China, affecting the industry at large. Other U.S. chipmakers, such as Micron Technology, have also faced obstacles, with China’s cyberspace regulator failing their products in security reviews and imposing bans on key infrastructure purchases.

Oracle’s significant investment in Nvidia chips reflects the growing importance of AI in cloud computing. By enhancing its infrastructure with GPUs and CPUs, Oracle aims to strengthen its position in the market, enabling the company to cater to the increasing demand for AI capabilities.

However, export control restrictions pose challenges for chipmakers, potentially impacting their access to vital markets and future business prospects. The ongoing U.S.-China technology dispute remains a significant factor shaping the industry’s landscape and competitiveness.

Nvidia’s Concerns over China Export Restrictions and Implications for the U.S. Industry

Meanwhile, Nvidia, the prominent chipmaker, has voiced apprehension regarding the potential impact of export restrictions on artificial intelligence (AI) chips to China.

While expecting no immediate material consequences, Nvidia’s Chief Financial Officer, Colette Kress, emphasized the long-term implications of such restrictions, including the permanent loss of opportunities for the U.S. industry. U.S. officials are considering tightening export control rules aimed at limiting the flow of AI chips to China, raising concerns within the industry.

Nvidia’s Outlook and Export Control Measures

The proposed export control rules would impose limits on the computing power of AI chips being exported to China, potentially hindering the U.S. industry’s access to a significant market. Last October, the U.S. issued comprehensive rules aimed at impeding China’s chip industry, while simultaneously investing billions of dollars in its own chip sector.

An update to these rules is expected by late July. Nvidia’s Chief Financial Officer cautioned that restrictions prohibiting the sale of datacenter graphic processing units (GPUs) to China would impact the U.S. industry’s future business and financial results, potentially curbing its ability to compete and lead.

Industry Implications and Challenges

The concerns surrounding export restrictions have led to a decline in Nvidia’s shares, which closed down 1.8% on Wednesday. However, the company has experienced significant growth this year due to the surging demand for AI chips. In response to previous export restrictions, Nvidia adjusted its strategy by offering a new advanced chip, the A800, to meet the export control rules in China.

Nevertheless, the newly proposed curbs would ban the sale of chips specifically designed for Chinese customers without a special U.S. export license, potentially affecting the company’s operations.

Broader U.S.-China Technology Dispute

Nvidia is not the only U.S. chipmaker affected by the ongoing tensions between the U.S. and China. China’s cyberspace regulator recently failed products from memory chipmaker Micron Technology in a security review, leading to bans on purchases by key infrastructure operators.

Micron anticipates that the ban will impact a low-double-digit percentage of its total revenue. The U.S.-China technology spat continues to pose challenges for chipmakers and impacts their ability to operate in a vital market.

The Last Bit, The potential tightening of export control rules on AI chips to China poses significant concerns for Nvidia and the U.S. chip industry as a whole. The permanent loss of opportunities in one of the world’s largest markets could have far-reaching consequences, affecting the U.S. industry’s ability to compete and lead.

As tensions persist between the U.S. and China, the implications of export restrictions extend beyond individual companies, highlighting the industry’s broader challenges and global competitiveness.