Nvidia exceeded expectations with an exceptional quarterly Wednesday’s earnings report reports a 265% increase in revenue from the same period a year ago, sending shares up more than 9% in extended trading. CEO Jensen Huang said Nvidia now needs to “allocate [chips] fairly” as customers flock to its processors, critical to the artificial intelligence boom. “Accelerated computing and generative artificial intelligence have reached the tipping point,” Huang said.
But amid the difficult quarter, Nvidia also acknowledged how tensions between the United States and China, particularly over semiconductors, are impacting its business. China now accounts for a “mid-single-digit percentage” of Nvidia’s data center revenue, Chief Financial Officer Collette Kress said Wednesday. You suggested that China would account for a similar percentage of revenue for the current quarter as well. (Data center revenue is in line with Nvidia’s AI chip business)
That’s a significant drop: Nvidia previously noted that China accounted for up to a quarter of the company’s data center revenue.
The United States first announced controls on sales of advanced semiconductors to China in October 2022. Companies like Nvidia then developed chips that complied with the restrictions but still offered the same advanced features. The Biden administration updated its restrictions last October to close this gap.
Kress admitted on Thursday that the US government did not license Nvidia to ship restricted products to China. Nvidia has started shipping alternative products to China that don’t require a license, he continued.
Huang said Nvidia “immediately paused” and “reset” its product offerings in China, which it blamed for declining data center revenue from China. The company will do its best to succeed in the Chinese market “within the limits of US restrictions,” she said.
Nvidia is again trying to develop chips for the Chinese market that comply with US restrictions, but Chinese customers are reportedly turning to domestic alternatives instead. Chinese tech companies are less interested in buying Nvidia’s downgraded products, which are now closer in performance to cheaper Chinese options. Wall Street Journal relationships. Chinese chipmakers are pitching their own chips as a more secure option due to the possibility of new controls by the United States, Reuters reported in December.