First hard bite under new US export controls
- Media reports possible order cancellation of up to US$5bn under new US export controls
- Nvidia does not expect a meaningful impact from the latest exports control in the near term
- Robust AI-chips demand globally and semiconductor industry recovery are offsetting factors
Possible order cancellation of up to US$5bn. Media reports that Nvidia may be forced to cancel up to US$5bn worth of advanced chip orders to China in compliance with new US government restrictions. Specifically, AI chips orders scheduled for delivery next year to major Chinese technology companies like Alibaba, TikTok would be subject to the latest regulations, while this year’s orders of advanced AI chips has been delivered to China. Based on its previous official comments, Nvidia does not expect a meaningful impact from the latest exports control in the near term.
Robust AI-chips demand globally and semiconductor industry recovery are offsetting factors. To be sure, the US$5bn worth of cancelled orders would invariably weigh on Nvidia’s financials in the coming year, if media reports turn out to the true. Even so, actual impact on Nvidia’s top-/bottom-lines should be offset by the robust demand for Nvidia’s AI chips in the rest of the world, facilitated/aided by a strong semiconductor industry recovery anticipated in 2024. Q4FY24 guidance on AI-chips demand and management’s comments on this development would be the key focal points when they report on 22-Nov. Maintain BUY with target price of US$608.40.