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Nvidia Profits Soar 206%, But China Sales To Dip

After recording record profits of $27.6 billion for the last three months, U.S. chipmaker Nvidia forecasts higher than estimated $30.5 billion revenues for its current quarter on strong demand for its AI processors, which should offset the drop in the semiconductor designer’s sales in China because of the new strict AI chip rule.

The U.S. chip maker is up 206% year on year due to soaring demand for its high-performance artificial intelligence chips, and companies like Microsoft, AMD, and Intel, have yet to catch up and design chips to enable generative AI training models.

To set investors’ minds at ease about the outcome of new US rules on high-performance chip exports to China, chief financial officer Colette Kress released a statement that the chip maker anticipates the region’s sales to “decline significantly” this quarter, but it should be “more than offset by strong growth in other regions.”

With roughly a quarter of Nvidia’s data centre revenue coming from its sales in China, the company will face competition for companies that can trade in the country as the U.S. continues stifling Beijing’s AI development.

Only weeks ago did the U.S. commerce department last hand down new export restrictions on AI chips to China, impacting Nvidia’s A800 and H800 processors.

Sources say the company rushed to design new AI chips that conform with export controls, but the company has not confirmed the new chips.

The data centre portion of the chip maker’s business has also done well because its biggest customers, Google, Amazon and Microsoft, are sprinting to incorporate AI capabilities, bringing in $22.1 billion in third quarter revenue, up 279% from last year.

Nvidia’s shares have more than tripled over the past year, which has elevated the chip maker’s shares to one of the top-performing stocks on Wall Street, raising its market capitalisation above $1.8 trillion.

However, stocks are down today 2.46% even after closing at a record high this week.

Nvidia’s net income rose to $15.2 billion in the third quarter, a 49% improvement from the previous quarter and a 588% surge from the same period last year. The diluted earnings per share also increased to $4.02, compared with $2.70 in the second quarter and 58 cents in the third quarter of last year.

After Nvidia revealed its H200 processor, an improvement to its H100 chips, the company claims the new product will give users “game-changing” performance and memory capabilities.

As for how the China sales will impact the chip giant’s revenue, the chief financial officer said Nvidia has not assessed the situation entirely yet, and that although the regulation-compliant chips may be coming out soon, she said, “we don’t expect their contribution to be material or meaningful.”

She added: “It’s a significant process to both design and develop these new products. That’s just going to take some time for us to go through, discussing with our customers their needs and desires for these new products that we have.”

Moving forward, she said that Nvidia will work with the U.S. government to ensure new products are aligned with chip regulations.

According to Nvidia chief executive Jensen Huang, this is a transformative time for the industry, and an array of tech companies are acting quickly to build their own contributions to the AI race.

“I think we are at the beginning of a — basically across the board — industrial transition to generative AI, to accelerated computing,” Huang said, with the “waves” of generative AI transforming the global economy and creating new opportunities, Nvidia should attract more customers.

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