Is Nvidia Defying US Export Controls? What's Going On?

Nvidia Corp NVDA is on track to sell $12 billion of artificial intelligence chips in China this year despite the U.S. export controls, the Financial Times reports.

According to analyst forecasts, the company will deliver more than 1 million new H20 chips, designed to circumvent U.S. restrictions on selling AI processors to Chinese customers.

That figure is nearly double what Huawei is expected to sell for its China-made rival product, Ascend 910B, the FT cites SemiAnalysis, chip consultancy estimates.

Each H20 chip costs between $12,000 and $13,000, suggesting Nvidia could generate over $12 billion in sales, surpassing the $10.3 billion revenue from its entire China business in the previous financial year.

Colette Kress, Nvidia’s finance chief, noted a significant decline in revenue from its data center segment in China following the imposition of new export controls in October.

Before U.S. export controls, China accounted for more than a quarter of Nvidia’s total revenues. Even if the H20 chip meets analysts’ expectations, China may account for about 10% of sales this year.

Analysts at Morgan Stanley and SemiAnalysis report that the H20 chip is now shipping in volume and is popular among Chinese customers despite its lower performance than Nvidia’s US-sold chips.

Most Chinese AI companies have built their AI models on Nvidia’s ecosystem, making a switch to Huawei’s infrastructure time-consuming and costly.

Despite the restrictions, Nvidia’s overall revenues from China, including Hong Kong, grew more than 50% year-on-year to $2.5 billion in the most recent quarter.

Recent reports indicated that Nvidia is under scrutiny because of reports of its advanced AI chips being smuggled into China.

Around 12,500 AI chips are estimated to be smuggled annually, while Nvidia sold over 2.6 million A100 and H100 chips globally last year.

Nvidia stock gained over 203% in the last 12 months. Investors can gain exposure to Nvidia through SPDR S&P 500 SPY and iShares Core S&P 500 ETF IVV.

Price Action: NVDA shares were trading lower by 0.76% at $127.40 premarket at the last check on Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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