GPUs Are Now a Matter of National Security

It’s no secret that artificial intelligence (AI) is transforming the way the world does business.  

Despite the exciting opportunities that lie ahead, there’s a darker side to this story. AI is also revolutionizing how wars are fought. In Ukraine, for example, we’re already seeing both sides use advanced AIs for drone targeting. In some ways the war has become a competition over who can collect and utilize the most AI training data. 

In the very near future, fleets of AI-piloted drones will swarm battlefields. These machines will automatically search for and target enemy positions. 

It seems inevitable that AI will eventually take over a bulk of battlefield tasks. 

Like all AI workloads, powerful GPUs are required to build and run military applications. The best GPUs in the world today are made by American companies; namely NVIDIA and AMD, with Intel likely to present more competitive offerings soon. Google also makes powerful AI chips called TPUs, but the company doesn’t sell them to competitors.  

The vast majority of cutting-edge AI hardware is designed in America and manufactured in Taiwan by TSMC.  

This new age of economic and kinetic warfare has prompted the U.S. government to restrict sales of high-end GPUs to China and other non-allied states.  

For now, at least, there’s so much demand for high-end GPUs that it’s not really hurting the leading GPU companies. Here’s an excerpt from CNBC’s reporting last fall: 

The restrictions cut off a big and growing market for AI semiconductors, and could raise concerns that the Chinese government will retaliate economically against U.S. firms doing business in the country. 

Nvidia seems to have anticipated the restrictions, and said in August that they would not have an immediate material effect on earnings, but might hurt over the long term. 

Chip Restrictions Working, But Could Backfire 

The U.S. strategy of containment appears to be working, at least on some levels. One piece of evidence is that no Chinese company has come close to matching the power of OpenAI’s GPT-4. Some startups are reporting that the lack of access to critical GPUs is slowing development of large language models (LLMs) and other advanced AI software. We can assume that the lack of top-end GPUs is also affecting the Chinese military’s development of AI tech.  

The sanctions strategy does have inherent risks, though. In March of 2023, NVIDIA CEO Jensen Huang warned of potential consequences: “If [China] can’t buy from … the United States, they’ll just build it themselves.” 

Unsurprisingly, China isn’t happy about being cut off from the GPUs powering the AI revolution.  In response, they are working feverishly to develop domestic alternatives.  

Chinese tech giant Huawei reportedly has a non-TSMC chip which is as powerful as an NVIDIA A100 (a fast chip, although a few years old at this point). Huawei’s production, however, is likely extremely limited. The real trick to NVIDIA’s success in the AI market is its powerful CUDA software package proprietary to the company’s hardware.  

Additionally, the equipment used to manufacture GPU semiconductors, lithography machines, are primarily made by a Dutch company named ASML. Sales of this foundational equipment to China have also been restricted. 

The bottom line is that China still has a long way to go until it can match American GPU power, but they have a very strong incentive to build domestic AI chip manufacturing capabilities. The risk is that the country gets left behind in the most important technological breakthrough since the PC. 

We’re in a unique situation, historically. The only period which might compare is when we saw the Allies’ encryption-breaking technology in WW2 make a massive difference. AI has the potential to play a similarly large, or even larger, role in future conflicts. 

HIVE is, of course, unaffected by these restrictions. In fact, the company just announced an order of 96 high-end H100 GPUs from NVIDIA back in December. The Company is busy converting its fleet of 38,000 GPUs, previously used to mine Ethereum, into GPU cloud infrastructure. Never-the-less, GPU wars are an important story to follow in today’s world, so we’ll keep you updated as it progresses.  


Adam Sharp 
The HIVE Newsletter