The United States on Tuesday said it was tightening curbs on exports of state-of-the-art AI chips to China, sending the share price of Nvidia and other semiconductor companies plummeting on Wall Street.

"Today's updated rules will increase the effectiveness of our controls and further shut off pathways to evade our restrictions," said Commerce Secretary Gina Raimondo.

The new rules tighten measures taken last year that banned the open sale to China of microchips that are crucial to the manufacturing of powerful AI systems that are powering software such as ChatGPT.

Raimondo insisted that the beefed up curbs were intended to close loopholes and designed to prevent China's military use of AI.

"It's true that AI has the potential for huge societal benefit. But it also can do tremendous and profound harm if it's in the wrong hands and in the wrong militaries," Raimondo told US media.

The main focus of attention had been Nvidia's industry leading H100 chip, which is crucial for the creation of generative AI, the technology behind ChatGPT and other powerful systems.

The update on Tuesday widens the earlier ban to lower-performing chips made by Nvidia and other manufacturers that were going to China unrestricted.

The rules will not affect chips used in consumer goods such as laptops, smartphones and gaming consoles, though some will be subject to export licensing requirements, a statement said.

The share price of Nvidia was down as much as six percent on Tuesday after the announcement, with Intel and AMD also sharply lower.

Those companies have lobbied hard to prevent further curbs on their business in China, so far unsuccessfully.

On a bridge-building visit to China in August, Raimondo said the US was seeking a more normalized relationship with the world's second biggest economy, but the new curbs will likely draw an angry reaction from Beijing.