US President Joe Biden has included Israel among countries facing new restrictions on importing advanced graphics processors used in artificial intelligence just days before leaving office, in a move that could have a significant impact on the country's tech sector.

Under new regulations, Israel will be grouped with Middle Eastern countries, including the UAE, Saudi Arabia and Egypt, as well as Eastern European countries such as Poland, Romania and Hungary, and other nations in South America.

As part of the last-minute surprise move, those countries will require special licenses to import high-performance chips from companies such as Nvidia, Intel and AMD, despite some of these processors being developed in Israel.

The decision comes as the race for AI dominance heats up worldwide, with all countries investing billions of dollars in state funds to get ahead of the competition. In the Middle East, the biggest purchasers so far have been Israel and Saudi Arabia, who have invested billions in supercomputers.

The rules set a quota of 50,000 chips over three years through 2027 for countries in this category. Israeli and UAE companies will need to submit detailed applications specifying intended use and receive explicit Commerce Department approval, potentially causing significant delays for the country's tech sector, academia, and even defence systems that rely on AI-powered computing.

Israel was notably excluded from the list of 18 exempt countries, which includes the United States, Australia, Belgium, Canada, Denmark, Finland, Germany, France, French Guinea, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, South Korea, Spain, Sweden, Taiwan and the UK.

Nvidia, which controls over 90% of the AI chip market, issued a sharp rebuke through its blog: "Global progress is now at risk. The Biden administration is seeking to restrict access to standard computing applications through an unprecedented and misguided AI Diffusion Act that threatens to harm innovation and economic growth worldwide."

The US’ new restrictions on chip exports to Israel have sparked strong reactions from the Israeli public, with many calling for reduced dependence on American technology.

"We must develop self-reliance in the semiconductor field. Instead of manufacturing chips for United States companies that we're then forbidden to buy, we should make them for Israeli companies. From this moment, we must stop selling Israeli companies abroad," wrote one commenter on a leading Israeli news site.

Others expressed confidence the measures would be short-lived. "This is a golden opportunity to buy semiconductor stocks while they're down due to this absurd law. There's no doubt Trump will cancel it very quickly," wrote another reader.

Some commenters criticised President Biden directly: "The world is waiting for a clear, stable, strong and correct American administration. Biden proved he is none of these things," one wrote, while another predicted: "Trump and Musk will notably change this presidential order."

Several responses focused on strategic implications for Israel: "We must reduce dependence on the United States and ensure local manufacturing capability – we have the technology and knowledge here. With friends like these, who needs enemies?" one reader commented.

The restrictions were also seen by some as politically motivated, with one commenter attributing them to "Obama's ideas to destroy the world and the Jewish state along the way."

The chip giant criticised the administration for introducing "complex regulations spanning over 200 pages, written in secrecy without proper legislative review" in its final days.

The company argued that while presented as "anti-China" regulation, the rules "will do nothing to improve United States national security" and instead control technology worldwide, including those currently available in gaming computers and consumer hardware.

The measures aim to prevent advanced processors from reaching countries like China or Russia, even via neutral states or United States allies.

These chips form the basis for supercomputers that could potentially threaten United States national security by decrypting military codes or operating AI-powered weapons systems.

The regulations have a 120-day implementation period, potentially allowing the incoming administration to modify them. While individual companies from affected countries may apply for special exemptions, the nature of restrictions on specific chip types remains unclear, particularly given the varying processing powers of different generations of processors.