NVIDIA, the US chip giant, is starting to feel the impact of Washington’s restrictions on sales of advanced chips to China. The company reported strong fourth-quarter results, with revenue up 265% to $22.1 billion, largely driven by demand for its data center graphics processing units (GPUs). However, revenue from the Chinese market declined significantly due to US export control regulations. In response, NVIDIA has begun shipping alternative AI chips to Chinese customers that do not require a license under the tighter export regime.
Colette Kress, NVIDIA’s CFO, explained in an earnings conference call that the company had not received licenses from the US government to ship restricted products to China. As a result, the company had to reconfigure its products in a way that cannot be hacked, which took some time. Kress also noted that China is expected to represent a mid-single-digit percentage of its data center revenue in the next quarter, remaining flat compared to the previous quarter.
The trade sanctions imposed by the US Commerce Department last October prevent NVIDIA from exporting its advanced GPUs, such as the A100 and H100, to China. These GPUs are highly sought-after for AI training. To work around these restrictions, NVIDIA had developed tailor-made A800 and H800 GPUs for Chinese clients in 2022. However, these alternative products were also blocked by the updated US controls. As a result, new alternatives like the H20, L20, and L2 GPUs were introduced.
Jensen Huang, NVIDIA’s CEO, believes that the US government’s core intention is to limit the latest capabilities of NVIDIA’s accelerated computing and AI for the Chinese market. He emphasized that the company has reconfigured its products in a way that they are not hackable. Despite the challenges, NVIDIA remains committed to the Chinese market and has started sampling its alternative products with customers in China.
NVIDIA’s prospects in China are uncertain, but the company is actively working to find solutions to navigate the US export controls. As China was NVIDIA’s third-largest single market in its financial year 2023, it is crucial for the company to adapt to the changing landscape. By shipping permissible AI chips to Chinese customers, NVIDIA aims to maintain its presence and support the growing demand for AI and data center GPUs in China.
While the road ahead may be challenging, NVIDIA remains optimistic about its global prospects. The company continues to experience strong growth in other regions and is committed to innovation and providing cutting-edge technology solutions. As the global landscape of technology and trade evolves, NVIDIA is determined to adapt and find ways to meet market demands, wherever they may arise.
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