Nvidia says U.S. government allows A.I. chip development in China

Nvidia On Thursday, the US government will allow it to continue developing its H100 artificial intelligence chip in China. It’s a victory for the company after warning on Wednesday that new export restrictions could hamper its operations in the country.

Nvidia said in a filing with the SEC on Wednesday that the US government is limiting sales of high-performance server AI chips, the A100 and H100, to China and Russia. Sales of both chips are still limited in those markets, although it may still develop the H100 in China. Nvidia expects a $400 million revenue impact in the current quarter due to new export restrictions.

Shares of the company fell nearly 9% in trading on Thursday.

“The U.S. government has authorized the exports, re-exports and domestic transfers necessary for further development of the H100 ICs by NVIDIA Corporation or the Company,” Nvidia said in a filing Thursday.

A sign is displayed at Nvidia headquarters on May 25, 2022 in Santa Clara, California.

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The Biden administration is working to limit U.S. exports of certain semiconductors and equipment over fears Chinese companies could use them for military purposes. Graphics processors like those from Nvidia and Advanced micro-systems make are well suited for artificial intelligence applications that could include weapons development, facial recognition, and other military uses.

The H100 is Nvidia’s next enterprise AI chip that was previously expected to ship by the end of the year. Part of its development takes place in China. The A100 is an older model that has been on the market for three years. They are both graphics processors that can be used for supercomputing and artificial intelligence.

Nvidia’s data center business, which includes sales of the A100 and H100, is one of the fastest growing parts of the business, with sales of $3.8 billion in during the June quarter, an annual increase of 61%.

However, Nvidia CEO Jensen Huang warned analysts in August that Chinese cloud companies were slowing down the construction of their data centers and that China was a “very big market” for the company. Nvidia said Thursday it could continue shipping AI chips from its Hong Kong factory until September 2023.

“Chinese hyperscalers and Chinese internet companies have really, really slowed down infrastructure investment this year, especially starting from — they’ve been kind of slow to grow and are really accelerating — well, really slowing down in the second quarter.” , Huang said.

Some analysts believe Nvidia can mitigate the impact of the new export restrictions by working with the government, although it’s unclear whether the Chinese government could retaliate with its own bans.

“While there are potential short- and medium-term risks associated with the export ban, Nvidia is working closely with the [U.S. government] to navigate through the situation and we believe the USG is fully aware of the critical/strategic importance of Nvidia’s accelerated computing platform to the global tech industry,” JPMorgan analyst Harlan Sur wrote. in a note Thursday.

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The Commerce Department said the new export restrictions were related to national security, but it did not respond to follow-up questions on whether it clarified or changed Nvidia’s policy.

“While we are unable to outline specific policy changes at this time, we are taking a comprehensive approach to implementing additional actions needed related to technologies, end uses, and end users to protect U.S. national security and foreign policy interests,” a Commerce Department official said on Wednesday.

AMD also said Wednesday that it had received new licensing requirements from the Commerce Department, but did not expect them to materially affect its business due to less exposure to China. AMD shares fell more than 4% in Thursday’s session.

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