Latest US exports regulations extended to Nvidia’s “China-only” chips
- Export ban now covers advanced AI-chips, A800 and H800
- Nvidia does not expect a near-term meaningful impact on their financial results
- Ample growth drivers for Nvidia remains, on ongoing AI adoption and industry recovery
Latest US exports regulations is now extended to more of Nvidia’s chips. These advanced AI-chips, namely A800 and H800, were previously manufactured for export to China, i.e., scaled down versions of cutting-edge A100 and H100 chips in compliance with prior regulations. It was further added that Nvidia would be required to “transition certain operations out of one or more of the identified countries”, under the purview of the latest tightened restrictions. Even as China contributed c. 21% of Nvidia FY23 total revenue, Nvidia does not expect a near-term meaningful impact on their financial results, owing to the strong demand worldwide for their products.
Ample growth drivers for Nvidia remains, beyond China. To be sure, the tighter export ban would invariably weigh on Nvidia’s financials in the longer term, even though the exact quantum remains unknown at this point. Nevertheless, investors should take comfort in the robust demand for Nvidia’s AI-chips worldwide, underpinned by the ongoing mass adoption of generative AI and semiconductor industry recovery. This should be reflected in upcoming Q3FY24 results (22-Nov), where Nvidia expects revenue to come in at US$16bn. Looking further, Nvidia’s further inroads in India AI and infrastructure space (see note) could nevertheless serve for as a fill-gap over time. Maintain BUY with target price of US$608.40.