Nvidia Corp. fell the most in more than two years on Thursday after warning that new rules governing the export of artificial-intelligence chips to China may affect hundreds of millions of dollars in revenue.
(Bloomberg) — Nvidia Corp. fell the most in more than two years on Thursday after warning that new rules governing the export of artificial-intelligence chips to China may affect hundreds of millions of dollars in revenue.
The stock dropped as much as 12% to a low of $132.76 following the disclosure Wednesday that Nvidia’s A100 and forthcoming H100 products will require approval from the US government before they can be sold to Chinese customers. It was the biggest intraday decline since March 2020, around the start of the pandemic.
In a separate filing on Thursday, Nvidia said the US government has authorized it to “perform exports needed to provide support for US customers of A100 through March 1, 2023.” Nvidia has also been granted permission to transfer necessary technology to China for the development of its upcoming H100 products. These exports are authorized to be conducted through the US chipmaker’s Hong Kong facility through Sept. 1, 2023, according to the filing.
That statement did little to assuage investors, who fear a big chunk of Nvidia’s sales are at risk. The company warned in its initial statement that the restrictions may cost it $400 million in revenue this quarter. The time limitations laid out in Thursday’s filing — as well as the fact there was no mention of any license for Chinese customers — suggested the US government is determined to clamp down on access to technology it deems could be misused for military purposes.
Nvidia relies on the Asian country for about a quarter of its revenue, and the temporary easing likely doesn’t allow it to sell the chips to some of the biggest buyers of that type of technology — Chinese hyperscalers, companies that operate giant data centers full of server chips.
What the easing does do is crucially allow Nvidia to use Chinese engineers and operations to complete development of its H100 chip, its latest piece of technology for the market.
“If Nvidia is unable to complete H100 development, the knock-on effects would likely be much larger than the direct revenue exposure in the current quarter,” Matt Ramsay, an analyst at Cowen & Co., wrote in a report.
Read more: Nvidia gives weak forecast, adding to concerns of chip slump
“We are working with our customers in China to satisfy their planned or future purchases with alternative products and may seek licenses where replacements aren’t sufficient,” the company said on Wednesday. “The only current products that the new licensing requirement applies to are A100, H100 and systems such as DGX that include them.”
US companies are under increasing government scrutiny over their dealings with China, the largest market for semiconductors, amid a growing rivalry between the world’s two largest economies. The US is trying to limit China’s access to technology, arguing that the country represents a security risk. China, in turn, is trying to build its own domestic capabilities to make itself less dependent on the US, which still dominates the design and development of the crucial technology.
Advanced Micro Devices Inc. said Wednesday that it received a similar notice from the government, though it doesn’t expect a significant impact. “At this time, we do not believe that shipments of MI100 integrated circuits are impacted by the new requirements,” the company said in a separate statement.
According to Nvidia’s Wednesday filing, the government’s new rules specify chips with certain performance capabilities.
The rules apply to both China and Russia, though Nvidia and AMD no longer sell to Russia.
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