Despite the imposition of U.S. export controls, Nvidia Corporation’s NVDA revenue in China has shown promising growth, although it has not yet returned to pre-control levels.
What Happened: On Wednesday, during the company’s second-quarter earnings call, Nvidia CFO Colette M. Kress highlighted that the company’s data center revenue in China had grown sequentially, contributing significantly to overall revenue.
However, she said, “As a percentage of total data center revenue, it remains below levels seen prior to the imposition of export controls,” adding, “We continue to expect the China market to be very competitive going forward.”
Later, when asked about the geographical dynamics of the revenue, Kress explained that the figures represent who they invoice, not necessarily where the product ends up.
She stated, “Yes, our China number there are invoicing to China. Keep in mind that is incorporating both gaming, also data center, also automotive in those numbers that we have.”
The Nvidia CFO also mentioned that they expect the Hopper to continue growing in the second half of the year and that the Blackwell architecture will present a growth opportunity in the fourth quarter.
Why It Matters: The U.S. has imposed export controls on semiconductor technology to China primarily due to national security concerns.
The government intends to prevent China from acquiring advanced chips that could enhance its military capabilities and facilitate the development of technologies such as AI and hypersonic missiles.
However, earlier it was reported that Chinese entities have found a way around these restrictions by accessing Nvidia’s AI chips through cloud services.
In July 2024, it was reported that Nvidia has been developing a new AI chip, designed to comply with U.S. export controls, specifically for the Chinese market. This chip, part of the Blackwell series, is expected to be mass-produced later this year.
Meanwhile, despite U.S. restrictions, Chinese tech giants like Alibaba and Tencent have ramped up their AI investments.
Nvidia’s second-quarter revenue surpassed Wall Street expectations, driven largely by robust data center sales. However, the company’s gross margin narrowed compared to the first quarter.
Price Action: As of the time of writing, Nvidia shares have dropped 6.89% in after-hours trading, reaching $116.95. The tech giant closed Wednesday's session at $125.61, down 2.10%, according to Benzinga Pro data.
Photo via Shutterstock.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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