According to Nvidia the US government now requires a new licence, effective immediately, to address the risk of chips being "used in, or diverted to, a 'military end use'... in China and Russia".
Could be that this rule will cost chip manufacturers millions in lost revenue.
Speaking to the BBC business analyst Dan Ives said that the new restrictions would be a "gut punch for Nvidia", which has already warned of depressed earnings due to weaknesses in the gaming market.
Chinese officials have firmly opposed the latest move and accused the US of ‘deviating’ from the principle of fair competition and ‘violating’ international economic and trade rules.
Tensions are already high between these two companies and this move is likely to further exacerbate the situation.
China is calling for fair treatment while the US is concerned about its national security and foreign policy issues – and it’s unlikely we’ll see a meeting of minds any time soon.
Nvidia has said that the new licence requirement would hit exports of its A100 and H100 chips, which are designed to speed up machine learning, and that around $400m in sales to China could be impacted.
AMD, however, has said the rules, which would prevent the shipment of its MI250 chips to China, were unlikely to have "a material impact" on its business. Despite that reassurance shares in both Nvidia and AMD have taken a hit in recent days.
Whatever happens both companies find themselves caught between Chinese and US geopolitical tensions.