TMTPost -- The U.S. government is considering expanding its export controls on artificial intelligence (AI) chips to more countries and regions, according to a report Tuesday.

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The Biden administration has discussed capping shipments of advanced AI chips from Nividia Corp. and other American companies on a country-specific basis, effectively setting a ceiling on export licenses for certain countries due to national security, Bloomberg cited people familiar with the matter. The people said deliberations are in the early stage and remain fluid.

The potential policy would reportedly build on a new framework to ease the licensing process for AI chip shipments to Middle East nations like Saudi Arabia, which are increasingly investing in AI data centers. The report noted the idea of country-based caps, which has gained traction in recent weeks, resulted from fears that the U.S. AI chip exports across the Middle East, Africa and Asia could be diverted to China. Sales to Persian Gulf nations are not banned outright, but require the suppliers of AI hardware including Nvidia to obtain special licenses. The reported export caps will make nations in the region harder to obtain these license due to fears of they are being used to funnel sensitive AI technologies to China.

The Bureau of Industry and Security (BIS) at the U.S. Department of Commerce, which oversees export controls, declined to comment on the report. It’s unclear how leading AI chipmakers like Nvidia would react to the ceiling on export license. Shares of Nvidia dropped 4.5% on reported new export controls and disappointing earnings and guidance of ASML Holding NV, the semiconductor equipment supplier and leading lithography machine manufacturer.

The Commerce Department is facilitating a process to introduce additional export controls on high tech including AI. The BIS published an interim final rule (IFR) on September 5, ready for implementing controls on critical and emerging technologies that have reached broad technical agreement among U.S. international partners. Officials then held a 60-day public comment period before issuing a final ruling.

Under the IFR, BIS  implements worldwide export controls on specific types of items, including: quantum computing items; advanced semiconductor manufacturing equipment that are essential for the production of advanced semiconductor devices;Gate All-Around Field-Effect Transistor (GAAFET) Technology that produces or develops high-performance computing chips that can be used in supercomputers; Additive Manufacturing Items that cover equipment, components and related technology and software designed to produce metal or metal alloy components.

BIS didn’t  explicitly name China in the documents, but the controls are in line with a series of moves the Biden administration has taken to restrict Beijing’s developments in areas such as semiconductor, AI and computing. BIS said its action strengthens our international relationships with like-minded countries and ensures that U.S. export controls keep pace with rapidly advancing technologies that pose serious threats to its national security when in the wrong hands.

“The most effective way to protect our national security is to develop and coordinate our controls alongside like-minded partners, and today’s actions demonstrate our flexibility in how we craft such controls to achieve our national security objective,” said Assistant Secretary of Commerce for Export Administration Thea D. Rozman Kendler.

The U.S. Commerce Department said several allies, including Japan and the Netherlands, have already announced or implemented new national controls for export of items related to quantum computing and advanced semiconductor manufacturing, and it anticipated  additional countries will implement similar controls soon. The latest IFR establishes a new License Exception Implemented Export Controls (IEC) so that countries may meet the terms of IEC by implementing equivalent national controls which would eliminate the need to submit license applications for those items, according to the department.