Nvidia, known for its leading GPUs in AI, faces concerns due to expanded U.S. export controls limiting sales to China. The company anticipates a dip in fourth-quarter sales in China while forecasting overall revenue above Wall Street expectations, citing eased supply-chain issues.
The new U.S. rules significantly affect Nvidia’s chip sales to China, constituting nearly a quarter of its datacenter sales. CFO Colette Kress highlighted uncertainties about the impact on their China business, despite confirming the development of compliant chips for the market, not expected to impact fourth-quarter revenue.
Amid stock volatility after-hours, Nvidia faces risks not only in China but also in Israel, where its networking business operates amidst conflict in Gaza. The company expressed concerns about employees in Israel called up for military duty, potentially affecting future operations.
Nvidia foresees robust demand for AI chips, aiming to enhance supply chain by prioritizing production and addressing demand. Despite high expectations for adjusted gross margins, concerns loom over the sustainability of these margins amidst China-related challenges.
The company’s profitability remains strong, with third-quarter revenues tripling and expectations for the current quarter’s revenue set at $20 billion, significantly surpassing analyst projections of $17.86 billion.
To mitigate the impact of U.S. export rules, Nvidia has developed new products for the Chinese market. However, uncertainties persist regarding potential bans and diversion of crucial resources to cater to China-specific chips.
The competition in AI chips intensifies with rivals unveiling innovative designs, and major tech giants like Google, Amazon, and Microsoft delving into custom chip development. Microsoft recently introduced tailored computing chips, underscoring the trend among major cloud companies to create in-house chips tailored to their AI requirements.
Despite these challenges, Nvidia remains a key player in the AI market, navigating complex geopolitical regulations while maintaining a strong foothold in the burgeoning AI landscape.
