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Nvidia says growth elsewhere will offset drop in sales to China

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Nvidia forecast higher than expected sales for its current quarter as the semiconductor designer said it expected strong growth in most regions to offset a “significant” drop in sales to China because of recently tightened AI chip rules.

The US group reported record revenues of $18.1bn for the three months to the end of October, up 206 per cent year on year as it continued to ride demand for its high-performance artificial intelligence chips.

In a note to investors, chief financial officer Colette Kress addressed concerns about the impact of new US sanctions on high-performance chip exports to China. The company expected sales to the Asian country to “decline significantly” in the current quarter, she said, but this should be “more than offset by strong growth in other regions”.

The company has disclosed that as much as a quarter of its data centre revenue comes from its sales to China, leaving the company exposed to geopolitical rivalries as Washington seeks to contain Beijing’s AI development.

The US commerce department last month announced fresh export restrictions on cutting-edge AI chips to China, affecting Nvidia’s A800 and H800 processors. This prompted the company to design new AI chips that comply with export controls — although it is yet to formally announce them.

Nvidia expects revenues of $20bn in the fourth quarter, plus or minus 2 per cent.

Nvidia’s data centre revenue hit $14.5bn in the third quarter, up 279 per cent from a year ago, as its biggest customers including the likes of Google, Amazon and Microsoft race to build their artificial intelligence capabilities.

Nvidia’s stock closed at a record high on Monday before slipping back 1 per cent to $499.44 on Tuesday. The price has more than tripled over the course of the past year, making the company one of the best performing stocks on Wall Street and lifting its market capitalisation above $1.2tn.

Nvidia shares fluctuated in after-hours trading following the earnings release.

Pro forma diluted earnings per share were $4.02 in the third quarter, compared to $2.70 in the second quarter and 58 cents for the same quarter of last year. Net income was $10bn, up 49 per cent on the prior quarter and 588 per cent year on year.

Nvidia’s chips are used in generative AI training models, and the company wields a virtual monopoly on them — with the likes of Microsoft, AMD and Intel racing to catch up.

Last week Nvidia unveiled its new H200 processor, an upgrade to its current H100 chips, which the company said offered “game-changing” performance and memory capabilities.

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