Concerns about new US restrictions on selling artificial intelligence chips to China have caused shares of major chip makers Nvidia and AMD to fall.

According to Nvidia, the US government requires a new license to be issued immediately in order to address the risk of chips being “used in, or diverted to a military end use’… in China and Russia.”

There are concerns that the rule will result in millions of dollars in lost revenue. Both chipmakers’ shares fell in New York after-hours trading. Nvidia’s stock fell 6.6%, while AMD’s fell 3.7%.

According to Dan Ives of Wedbush Securities, the new restrictions are a “gut punch for Nvidia.”

Chinese officials have been outspoken in their opposition to the latest move. According to state media, “actions by the United States violated international economic and trade rules and deviated from the principle of fair competition.”

In a statement, Beijing said, “The US side should immediately cease its wrongdoing, treat companies worldwide fairly, including Chinese companies, and do more things that are conducive to global economic stability.”

According to the Resouces, the US Commerce Department is “not in a position to outline specific policy changes at this time.”

To safeguard US national security and foreign policy interests, “we are taking a comprehensive approach to implement additional actions related to technologies, end-uses, and end-users,” a spokesperson for the Department of Commerce said.

“This includes preventing China from acquiring and using US technology as part of its military-civil fusion programme to fuel its military modernization efforts, commit human rights violations, and enable other malign activities.”

Nvidia said in a US regulatory filing on Wednesday that the new license requirement would affect exports of its A100 and H100 chips, designed to accelerate machine learning tasks and the systems that use them.

Nvidia added that sales to China could be affected by $400 million (£345.2 million) if customers do not want to buy the company’s alternative product offerings or if the (US government) does not grant licenses promptly or denies licenses to significant customers.

According to an Nvidia spokesperson, the company is working with customers in China “to satisfy their planned or future purchases with alternative products.”

Meanwhile, an AMD spokesperson stated that the rules, which would prevent the shipment of its MI250 chips to China, would not have a “material impact” on business.

Following the invasion of Ukraine in February, both Nvidia and AMD suspended sales to Russia.

Analysts believe the US requirements will make it more difficult for China to obtain advanced computing chips.

Mario Morales, a California-based analyst at market intelligence firm IDC, could also impact US manufacturers’ earnings such as Nvidia and AMD.

“Both companies have significant exposure to China and may face additional consequences in the future, particularly if China chooses to retaliate,” Mr. Morales said.

Nvidia reported $6.7 billion in revenue for the second quarter, which was significantly lower than forecasts.

However, revenue from its data center business, which manufactures computer chips, increased by 61% yearly.

“This is a clear shot across the bow at China, and it will only stoke the geopolitical fires (tensions). Nvidia has been caught in the crossfire “Mr. Ives stated.

The United States and China have been at odds for a long time over trade and technology.

Tensions between the world’s two largest economies rose earlier this month following US Representative Nancy Pelosi’s controversial visit to Taiwan.