TL;DR:
- Nvidia postponed the launch of the H20 chip due to U.S. sanctions on tech exports to China.
- The L20 PCIe chip remains on schedule, but the status of the L2 PCIe chip is uncertain.
- New restrictions aim to limit China’s access to advanced semiconductors for military applications.
- Rules now focus on overall semiconductor performance rather than individual chip computing power.
- Nvidia anticipates a significant slowdown in China sales, impacting their data center revenue.
- Nvidia’s shares experienced a 2.1% decline in pre-market trading.
Main AI News:
Nvidia’s stock witnessed a decline during early Friday trading, stemming from reports suggesting a delay in the launch of their new AI-focused semiconductors. These cutting-edge chips are specifically designed to comply with stringent U.S. sanctions imposed on tech exports to China.
As reported by Reuters on Friday, Nvidia has informed its customers about the postponement of the H20 chip’s launch. This chip is one of three that the company has been developing in response to the heightened restrictions on exports to China, implemented by the Biden administration last month. The revised timeline indicates that the H20 chip will now be launched in early next year.
While the L20 PCIe chip is expected to adhere to its original schedule, the fate of the L2 PCIe chip remains uncertain. These new restrictions are an expansion of the export rules introduced last year and are strategically designed to curtail China’s access to “advanced semiconductors that could fuel breakthroughs in artificial intelligence and sophisticated computers, which are critical to Chinese military applications,” as explained by Raimondo.
Additionally, these rules address a previous loophole that allowed Nvidia to sell its A800 and H800 semiconductors. Instead of assessing individual chip computing power, the focus now centers on overall performance. Nvidia had previously indicated that China sales would likely slow down significantly in the current quarter due to these new rules, casting a shadow over the company’s otherwise better-than-expected third-quarter earnings.
During an investor conference call, Kress mentioned, “We had seen historically over the last several quarters that China and some of the other impacted destinations are about 20% to 25% of our data center revenue. We are expecting our guidance for that to decrease substantially as we move into Q4. The export controls will have a negative effect on our China business, and we do not have good visibility into the magnitude of that impact even over the long term.”
Consequently, Nvidia’s shares experienced a 2.1% decline in pre-market trading, indicating an opening bell price of $477.00 each.
Conclusion:
The delay in Nvidia’s AI chip launch, coupled with the uncertainty surrounding export regulations, indicates a challenging landscape for the company in the Chinese market. These developments underscore the impact of geopolitical tensions on tech companies, highlighting the need for adaptable strategies in navigating complex international trade dynamics.
