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NVIDIA (NVDA) Falls 7% as US Halts Top AI Chip Sales to China
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NVIDIA Corporation’s (NVDA - Free Report) shares plunged 6.6% in Wednesday’s extended trading session after it revealed that the U.S. government told it to stop exporting top artificial intelligence (“AI”) chips to China and Russia.
In a filing with the Securities and Exchange Commission (“SEC”), NVIDIA disclosed that the U.S. government informed it on Aug 26 about imposing a new licensing requirement, effective immediately, for its A100, A100X and forthcoming H100 integrated circuit sales in China and Russia. The government has also banned NVIDIA from exporting DGX or any other systems that incorporate A100 or H100 integrated circuits.
The new licensing requirements will also be implied on any future chip designs developed by NVIDIA that have a threshold greater than or equivalent to A100. Additionally, any systems developed in the future incorporating the aforementioned types and thresholds will also fall under export restrictions.
With the new licensing requirements, the U.S. government intends to “address the risk that the covered products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China and Russia,” per NVDA in the SEC filing.
NVIDIA’s A100 and H100 are its highest-performance chips used in data centers for AI, data analytics and computing applications. Though the company does not sell products to customers in Russia, the new licensing requirements are going to significantly hurt its data center chip sales in China.
The newly imposed restrictions are likely to impact the company’s ability to support the existing customers of A100 as well as complete the development of H100 timely. This could also require NVIDIA to transition some of its operations outside China.
The restrictions are expected to hamper NVIDIA’s business in China from where the company is expecting to generate $400 million in revenues from the sale of the aforementioned chips in the third quarter of fiscal 2023. The company warned that it may lose revenues if Chinese firms decide not to buy alternative NVIDIA products.
The latest restriction is a new blow to NVIDIA, which is already being hurt by the weakening demand for its chips used in gaming products. Last week, the company reported revenues of $6.7 billion for the second quarter of fiscal 2023, way lower than its May 2022 forecast of $8.10 billion (+/-2%), due to weaker sales across its Gaming and Data Center business segments.
NVIDIA’s Gaming segment revenues plunged 33% year over year due to a lower sell-in of Gaming products, reflecting reduced channel partner sales due to macroeconomic headwinds. Although Data Center revenues jumped 61% year over year, the company stated that sales were below expectations due to ongoing supply-chain disruptions and lower sales to China’s hyperscale customers, who are affected by economic conditions.
Considering the current business environment, the company issued dim revenue guidance for the third quarter, wherein it expects to generate $5.9 billion (+/- 2%) in sales, approximately 17% lower than the year-ago quarter’s revenues. Looking at the latest U.S. government’s restriction on chip sales to China, the company is highly probable to report third-quarter revenues way lower than its August 2022 guidance.
Zacks Rank & Stocks to Consider
NVIDIA currently carries a Zacks Rank #5 (Strong Sell). Shares of NVDA have declined 48.7% year to date (“YTD”).
Some better-ranked stocks from the broader Computer and Technology sector are Clearfield (CLFD - Free Report) , Silicon Laboratories (SLAB - Free Report) and Taiwan Semiconductor (TSM - Free Report) . While Clearfield and Silicon Laboratories each sports a Zacks Rank #1 (Strong Buy), Taiwan Semiconductor carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Clearfield's fourth-quarter fiscal 2022 earnings has been revised upward by 10 cents to 80 cents per share over the past 60 days. For fiscal 2022, earnings estimates have moved 36 cents north to $3.13 per share in the past 60 days.
Clearfield’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 33.9%. Shares of CLFD have soared 37.6% YTD.
The Zacks Consensus Estimate for Silicon Laboratories’ third-quarter 2022 earnings has increased 36.1% to $1.13 per share over the past 60 days. For 2022, earnings estimates have moved 20.5% up to $4.41 per share in the past 60 days.
Silicon Laboratories’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 63.6%. Shares of SLAB have decreased 39.3% YTD.
The Zacks Consensus Estimate for Taiwan Semiconductor's third-quarter 2022 earnings has been revised a penny southward to $1.69 per share over the past 30 days. For 2022, earnings estimates have moved 37 cents north to $6.30 per share in the past 60 days.
TSM's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.9%. Shares of the company have decreased 30.7% YTD.
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NVIDIA (NVDA) Falls 7% as US Halts Top AI Chip Sales to China
NVIDIA Corporation’s (NVDA - Free Report) shares plunged 6.6% in Wednesday’s extended trading session after it revealed that the U.S. government told it to stop exporting top artificial intelligence (“AI”) chips to China and Russia.
In a filing with the Securities and Exchange Commission (“SEC”), NVIDIA disclosed that the U.S. government informed it on Aug 26 about imposing a new licensing requirement, effective immediately, for its A100, A100X and forthcoming H100 integrated circuit sales in China and Russia. The government has also banned NVIDIA from exporting DGX or any other systems that incorporate A100 or H100 integrated circuits.
The new licensing requirements will also be implied on any future chip designs developed by NVIDIA that have a threshold greater than or equivalent to A100. Additionally, any systems developed in the future incorporating the aforementioned types and thresholds will also fall under export restrictions.
With the new licensing requirements, the U.S. government intends to “address the risk that the covered products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China and Russia,” per NVDA in the SEC filing.
NVIDIA Corporation Price and Consensus
NVIDIA Corporation price-consensus-chart | NVIDIA Corporation Quote
Export Restrictions to Hurt NVIDIA’s Sales
NVIDIA’s A100 and H100 are its highest-performance chips used in data centers for AI, data analytics and computing applications. Though the company does not sell products to customers in Russia, the new licensing requirements are going to significantly hurt its data center chip sales in China.
The newly imposed restrictions are likely to impact the company’s ability to support the existing customers of A100 as well as complete the development of H100 timely. This could also require NVIDIA to transition some of its operations outside China.
The restrictions are expected to hamper NVIDIA’s business in China from where the company is expecting to generate $400 million in revenues from the sale of the aforementioned chips in the third quarter of fiscal 2023. The company warned that it may lose revenues if Chinese firms decide not to buy alternative NVIDIA products.
The latest restriction is a new blow to NVIDIA, which is already being hurt by the weakening demand for its chips used in gaming products. Last week, the company reported revenues of $6.7 billion for the second quarter of fiscal 2023, way lower than its May 2022 forecast of $8.10 billion (+/-2%), due to weaker sales across its Gaming and Data Center business segments.
NVIDIA’s Gaming segment revenues plunged 33% year over year due to a lower sell-in of Gaming products, reflecting reduced channel partner sales due to macroeconomic headwinds. Although Data Center revenues jumped 61% year over year, the company stated that sales were below expectations due to ongoing supply-chain disruptions and lower sales to China’s hyperscale customers, who are affected by economic conditions.
Considering the current business environment, the company issued dim revenue guidance for the third quarter, wherein it expects to generate $5.9 billion (+/- 2%) in sales, approximately 17% lower than the year-ago quarter’s revenues. Looking at the latest U.S. government’s restriction on chip sales to China, the company is highly probable to report third-quarter revenues way lower than its August 2022 guidance.
Zacks Rank & Stocks to Consider
NVIDIA currently carries a Zacks Rank #5 (Strong Sell). Shares of NVDA have declined 48.7% year to date (“YTD”).
Some better-ranked stocks from the broader Computer and Technology sector are Clearfield (CLFD - Free Report) , Silicon Laboratories (SLAB - Free Report) and Taiwan Semiconductor (TSM - Free Report) . While Clearfield and Silicon Laboratories each sports a Zacks Rank #1 (Strong Buy), Taiwan Semiconductor carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Clearfield's fourth-quarter fiscal 2022 earnings has been revised upward by 10 cents to 80 cents per share over the past 60 days. For fiscal 2022, earnings estimates have moved 36 cents north to $3.13 per share in the past 60 days.
Clearfield’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 33.9%. Shares of CLFD have soared 37.6% YTD.
The Zacks Consensus Estimate for Silicon Laboratories’ third-quarter 2022 earnings has increased 36.1% to $1.13 per share over the past 60 days. For 2022, earnings estimates have moved 20.5% up to $4.41 per share in the past 60 days.
Silicon Laboratories’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 63.6%. Shares of SLAB have decreased 39.3% YTD.
The Zacks Consensus Estimate for Taiwan Semiconductor's third-quarter 2022 earnings has been revised a penny southward to $1.69 per share over the past 30 days. For 2022, earnings estimates have moved 37 cents north to $6.30 per share in the past 60 days.
TSM's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.9%. Shares of the company have decreased 30.7% YTD.