China has blocked the use of American computer chips in their government devices meaning the manufacturers' will lose billions in sales as relations between Beijing and the White House worsen.

The communist country has introduced guidelines to phase out chips made by Intel and Advanced Micro Devices and also wants to sideline Microsoft's Windows and foreign-made database software in favor of domestic options. 

It is the latest step in a race between the two countries to cut out as much of each other's technology as possible, with the US seeking to restrict TikTok, banning Huawei products and limiting investments in Chinese tech.

After the ban was announced over the weekend, shares in chip companies fell - Intel was down 1.6 percent, Microsoft was down 1 percent while Advanced Micro Devices fell but then rose again by 0.66 percent. Experts estimated that the ban could wipe $1.5 billion off Intel and a few hundred million of Advanced Micro Devices in sales.

It is the latest step in a technology cold war between the two countries which has seen the US place sanctions on a long list of Chinese companies on national security grounds.

Last week, senators compared social media app TikTok to a 'gun pointed at American's heads.' The House passed a bill that would force China-based ByteDance to divest from TikTok in roughly six months or face a ban. Sen. Richard Blumenthal (pictured) told DailyMail.com that through the app, 'the Chinese Communist are weaponizing information that they are constantly, surreptitiously collecting from 170 million Americans and potentially aiming that information, using it through algorithms, at the core of American democracy.'

The new chip ban was announced on December 29, according to the Financial Times, with government agencies and patties ordered to start choosing 'safe and reliable' processors when making purchases. 

A list of the suitable 'safe and reliable processors' contains only Chinese companies. The latest move could make a big dent on the chip firms' earnings as China was Intel's largest market in 2023 with 27 percent of revenue, while AMD drew about 15 percent of its sales from the country.

Bernstein analyst Stacy Rasgon said: 'A total cessation of China governmental purchases of Intel and AMD CPUs might impact revenue by low-single digits.' But he said Intel could be dealt a higher hit to its profit 'given higher exposure and the vagaries of a worse cost structure'.

Apple has also been caught up in rising Sino-U.S. tensions, with Bloomberg News reporting in December that Chinese agencies and state-backed firms have asked their staff to not bring iPhones to work.

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