Nvidia Corp.’s share fell in late trading Wednesday after new rules regarding the export of artificial intelligence chips to China may impact millions of dollars.
As per Bloomberg News, Nvidia stock declined 5.1% in extended trading after the disclosure of new rules that required H100 and A100 products will need the approval of the US government before they can be sold to customers in China. According to the filing by Nvidia Wednesday, the US is worried that the military will use these processors, and the company got the notification on August 26.
Sales Impact
Low demand for personal computers has caused a slump in sales of chips by Nvidia. The day before the notice, the company announced a disappointing forecast. It said the reduction in shipments was required to reduce inventory stockpiles. The new rules have added to the problems. According to the company, it faces $400 million of sales loss if they are not allowed to sell the chips to China. This amount accounts for 6.8% of the total revenue for the third quarter of this fiscal.
In an emailed statement, Nvidia said they are interacting with their customers in China to satisfy their purchases- current and future with alternative products. Nvidia may seek licenses if the replacements are not sufficient. The products that require licensing are A100 and H100 chips and systems like DGX that use these chips.
Security Risk
The increasing rivalry between China and the US, the two largest economies in the world, has led to greater scrutiny of the dealings of US companies with China. China is the biggest market in the world for semiconductors. The US is trying to limit China’s access to its technology as it feels China represents a security threat.
China is trying to build its capabilities and make itself less dependent on the US. The US is a dominant player in the design and development of crucial technology.
Another company, Advanced Micro–Devices Inc., also received a similar notice from the US Government. The company, however, feels that the notice will not have a material effect. The company said the new rules would not affect its MI 100 integrated circuits shipment.
Nvidia’s filing says that the government’s new rules mention chips with specific performance capabilities. The new rules apply to China and Russia; however, AMD and Nvidia no longer sell to Russia after the sanctions.
