Outgoing US President Joe Biden has delivered another "bombshell" ahead of leaving the White House by including Israel among 150 countries restricted in the export of graphics processing unit (GPU) chips. Under the recently approved AI Diffusion Rule guidelines, Israel has been classified among the nations restricted from importing American-made GPU chips—used for training and developing artificial intelligence engines and previously employed for cryptocurrency mining—produced by companies such as NVIDIA, Intel, and AMD. Ironically, many of these processors are developed in Israel itself.
As part of these restrictions, any Israeli entity seeking to purchase more than 1,700 of these chips will need to submit a special request over the next three years, detailing their intended use and obtaining an import permit from the US Department of Commerce. Even with approval, purchases will be capped at 50,000 chips. Under strict security and usage agreements with the US government, the cap may extend to 100,000 chips.
The Israeli tech industry has voiced concerns that this rule could delay the deployment of GPU processors in Israel, slow the growth of the local high-tech industry, and impact any sector reliant on GPUs.
Contrary to popular belief, this measure—officially aimed at addressing Democratic Party concerns about China's rise in AI—may inadvertently align with Israel's ongoing advancements in chip development. The restriction focuses on the quantity of chips with specific processing capabilities and is primarily technical. However, companies like NVIDIA and Intel are already competing to develop chips with greater processing power.
Huang's Law
According to "Huang's Law," the processing power of GPUs doubles approximately every two years (NVIDIA's RTX 50 series has been doubling processing power every 18 months). Consequently, a cap on the number of chips becomes less impactful as individual chip capabilities continue to improve. This trend may even accelerate the existing race to enhance GPU processing power.
Israel's semiconductor industry is already focused on chip development, and this restriction may increase global demand for these capabilities. Moreover, Israel’s geographic constraints make it less suited for establishing vast GPU farms, with the country excelling instead in chip design and development rather than building large-scale data centers.
The primary impact is likely to be on chip companies, including American firms like NVIDIA, AMD, Broadcom, and Marvell, which rely heavily on global exports and have opposed this rule.
Additionally, the incoming administration under Donald Trump, set to take office soon, may reverse or adjust this restriction before it takes effect in 120 days.
Another critical point not widely discussed is that these chips are used not only for AI data centers but also for encryption, decryption, and encoding purposes. The restriction could impede companies specializing in cybersecurity and those engaged in cryptocurrency mining based on the Proof of Work model (such as Bitcoin mining). This limitation affects companies outside the US and the 18 exempted countries, including Ireland, the UK, Sweden, Denmark, Finland, and Norway—nations that traditionally have limited political alignment with Israel.
The author is an attorney and CPA, as well as CEO of JAGuar Reg&Comp, specializing in high-risk regulatory fields – artificial intelligence and digital currencies.