Nvidia says growth elsewhere will offset falling sales in China

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Nvidia forecasts higher-than-expected sales for its current quarter, as the semiconductor designer said it expects strong growth in most regions, offsetting a “significant” drop in sales in China due to of the recent tightening of rules on AI chips.

The US group reported record revenue of $18.1 billion for the three months ended October, up 206% year-on-year, as it continues to meet demand for its computer chips. high-performance artificial intelligence.

In a note to investors, Chief Financial Officer Colette Kress raised concerns about the effect of new U.S. sanctions on high-performance chip exports to China. The company expects its sales in the Asian country to “decrease significantly” in the current quarter, it said, but that should be “more than offset by strong growth in other regions.

Nvidia has revealed that nearly a quarter of its data center revenue comes from its sales to China, exposing it to geopolitical rivalries as Washington seeks to contain Beijing’s AI development.

The US Department of Commerce announced new restrictions on the export of cutting-edge AI chips to China last month, affecting Nvidia’s A800 and H800 processors. This has prompted it to design new AI chips that comply with export controls – even if it has not yet officially announced them.

Nvidia expects revenue of around $20 billion in the fourth quarter.

Nvidia’s data center revenue was $14.5 billion in the third quarter, up 279% from a year ago, as its biggest customers including Google, Amazon and Microsoft, are working to expand their AI capabilities.

Nvidia shares closed at a record high on Monday before falling 1% to $499.44 on Tuesday. Its stock price has more than tripled over the past year, making it one of the best-performing stocks on Wall Street and pushing its market capitalization above $1.2 billion.

Nvidia shares were down 1.7 percent in after-hours trading following the earnings release.

Diluted earnings per share were $4.02 in the third quarter, compared with $2.70 in the second quarter and 58 cents in the same quarter last year. Net profit was $10 billion, up 49 percent from the previous quarter and 588 percent year-over-year.

Nvidia’s chips are used in generative AI training models, and it has a near-monopoly on them – with companies like Microsoft, AMD and Intel racing to catch up.

Last week, Nvidia unveiled its H200 processor, an upgrade to its H100 chips, which it says offers “revolutionary” performance and memory capabilities.

In a call following the earnings release, analysts repeatedly asked Kress for more details about the impact of U.S. export restrictions on the company’s revenue.

Kress said that Nvidia does not have good visibility on their impact on its sales in China, even in the long term, and that while new chips compliant with the regulations could be available in the coming months, “we do not do not expect their contribution to be material or material.” significant”.

Forecasts for the current quarter could have been “a little higher” without the new restrictions, she conceded.

“The design and development of these new products is a significant process,” Kress said. “It’s just going to take us some time to talk with our customers about their needs and wants regarding these new products that we’re offering.”

Nvidia “was going to make sure that we are in full discussion with the US government” about the new products, she added.

Nvidia CEO Jensen Huang stressed that the explosion of AI products is still in its early stages. Software companies were realizing they were “sitting on a gold mine” of information that they could develop into their own custom AI products, he said, and a wide range of companies were preparing to create their own personalized AI.

“I think we are at the beginning of an industrial transition – essentially general – towards generative AI, towards accelerated computing,” Huang said, with the “waves” of generative AI overtaking the start-up world. up to permeate the global economy. , bringing new customers to Nvidia.