Nvidia slumps on new US-China chip curbs; says no 'meaningful impact' in near-term
Justin Sullivan
Nvidia's (NASDAQ:NVDA) stock fell ~6% on Tuesday after the U.S. brought in new updates which would curb the sale of chips that Nvidia (NVDA) made for the Chinese market, part of Washington's export restrictions aimed at hindering China's access to advanced semiconductor technology.
Nvidia (NVDA), however, does not expect a near-term meaningful impact on its financial results.
"We comply with all applicable regulations while working to provide products that support thousands of applications across many different industries," Nvidia spokesperson said in a statement to Seeking Alpha. "Given the demand worldwide for our products, we donât expect a near-term meaningful impact on our financial results."
Citi Research's analysts noted that last quarter, Nvidia mentioned that China demand was within the historical range of 20-25% of their data center revenue. Given the strength of its AI demand, Nvidia previously commented that additional export restrictions, if adopted, would not have an immediate material impact to financial results. However, over the long term, this would represent a permanent sales loss, according to the analysts.
The new restrictions will target Nvidia's A800 and H800 chips, Bloomberg News reported citing a senior U.S. official. These were created for export to China after the U.S. unveiled its initial restrictions in October 2022.
The new rules also require companies to notify the U.S. government before selling chips which go below the controlled threshold, the report added.
Top-line chips are best for artificial intelligence, or AI, models. However, with enough money and a little jury-rigging, a whole class of slightly inferior chips could also be used for AI and supercomputing thus pose a national security risk, according to a senior administration official.
The updated restrictions broadly allow the sale of advanced commercial chips to Chinese companies for use in consumer products such as smartphones, computers and electric vehicles. However, the U.S. government will curb the most advanced consumer chips â such as those used in AI data centers â and impose a notification process on certain varieties just behind the cutting edge, the report noted.
The U.S. will also need companies to get a license to sell chips to more than 40 countries which Chinese companies could use as intermediaries to go around the U.S. controls. It will add two Chinese businesses and their units to a trade restriction list which requires companies to get a U.S. government license before shipping to those firms, the report noted.
The Biden administration is also expanding the scope of manufacturing gear subject to curbs. On the question if the U.S. would restrict less advanced DUV machines, which are mainly supplied by Dutch company ASML (ASML) (OTCPK:ASMLF), an administration official noted that the U.S. has worked with the Netherlands on the policy.
Intel (INTC), Advanced Micro Devices (AMD), Marvell Technology (MRVL), and Broadcom (AVGO) were all down about ~3% each, while Qualcomm (QCOM) had dipped ~2% on Tuesday.
In August, U.S. President Joe Biden signed an executive order to regulate certain U.S. investments in China in three areas â semiconductors and microelectronics, quantum information technologies, and artificial intelligence, or AI. The U.S. issued final rules in September, which later saw China's international trade council formally requesting the U.S. to "carefully consider" the regulations.
Earlier this month, it was reported that the U.S. was giving China an additional warning that it will update its rules on export controls for semiconductors and related equipment.

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