Nvidia diminishes potential impact of U.S. chip export restrictions

In Taipei, Taiwan, at the showroom of Nvidia Corp.’s offices, a cutting-edge artificial intelligence supercomputing graphics processing unit (GPU) called HGX H100 is on display. This powerful GPU is crucial for developing AI software like ChatGPT.

The future of exporting these AI chips to China may face new restrictions from the US, according to a report by The Wall Street Journal. This development could pose challenges for Nvidia, the market leader in graphics processors required for AI applications.

CFO Colette Kress of Nvidia addressed concerns at a financial conference, stating that while the restricted exports may not have an immediate financial impact, further limitations could hinder the company’s growth in the future.

Kress’s comments initially boosted Nvidia’s stock, but it later experienced a decline of approximately 1.8% during intraday trading. Nevertheless, Nvidia’s shares have seen a remarkable increase of over 179% throughout 2023.

In response to potential restrictions, Kress acknowledged that the US Department of Commerce is considering controls on exports of A800 and H800 products to China. However, due to high global demand for Nvidia’s products, the company does not expect the additional restrictions, if imposed, to significantly affect its financial results in the short term.

Kress revealed that China represents 20% to 25% of Nvidia’s data center revenue, which amounted to $4.28 billion in sales during the first quarter. This includes revenue generated from other chips, not solely those used for AI, such as networking components.

While acknowledging potential impacts, Kress emphasized the long-term consequences of prohibiting the sale of their data center products to China. This action, if taken, would result in a permanent loss of opportunities for the US industry to compete and lead in one of the largest global markets, thereby affecting Nvidia’s future business and financial outcomes.

Nvidia is recognized as the leading provider of essential components for constructing advanced AI systems. The company’s A100 and newly developed H100 chips are highly sought after by AI engineers. The US government has been working to limit Chinese access to Nvidia’s technology, aiming to prevent them from catching up to the US in this field.

Prior to this, Nvidia had already introduced modified versions of the A800 and H800 chips to comply with US export controls. However, the report suggests that the new restrictions from the Commerce Department could further restrict the export of even these modified chips.