Shares of Nvidia Corp. fell in extended trading on Wednesday after the graphics chip specialist disclosed that the US government was seeking to curb its data center business in China.
revealed that the US has installed new license requirements for its A100 and upcoming H100 integrated circuits — Nvidia’s highest-performance server products — in sales in China and Russia. The filing specifically states that Nvidia’s forecast for the current quarter includes an estimated $400 million in data center sales in China that could be affected by the move; Currently, Nvidia does not sell products in Russia.
“We are working with our customers in China to satisfy their planned or future purchases with alternative products and may seek licenses when a replacement is not sufficient,” an Nvidia spokesperson said in an emailed statement. “The only current products subject to the new license requirement are the A100, H100 and systems such as the DGX that incorporate them.”
Shares of Nvidia fell more than 4% in after-hours trading after closing down 2.4% at $150.94. The stock is down 48.7% so far this year amid challenges in its core gaming chip business, while the S&P 500
has fallen by 16.4%.
While sales of gaming cards have slumped in recent months following a stockpile, Nvidia’s business relies on data center sales. Data center revenue rose to $10.6 billion last year from $6.7 billion the year before, and analysts on average expect server sales to reach $15.79 billion this year, according to FactSet.
Wednesday’s news could hurt future business in the data center segment, as Nvidia acknowledged in the filing that H100 development could be affected and that “any future Nvidia integrated circuit achieving both peak performance and I/ O chip-to-chip performance equal to or higher than the thresholds that are roughly equivalent to the A100, and any system that includes these circuits’ will face the same requirement.
“The new license requirement may affect the company’s ability to complete its H100 development in a timely manner or maintain existing A100 customers and may require the company to transfer certain operations outside of China,” the SEC filing said. “The company is committed to [U.S. government] and seeks exemptions for the company’s internal development and support activities.”
Nvidia said the federal government’s new licensing requirements are intended to “address the risk that covered products will be used or diverted to a ‘military end use’ or ‘military end user’ in China and Russia.” The U.S. has for years taken steps to prevent the Chinese military from obtaining high-performance semiconductor technology, including blocking proposed acquisitions by Chinese parent companies and limiting sales.
Other US server chip makers also saw their shares fall in after-market trading on Wednesday, although Nvidia appeared to be the company most affected by the decision. Advanced Micro Devices Inc.
shares were down about 2%, while Intel Corp.
shares fell about 0.3%.