Nvidia Corp. (NVDA) shares moved firmly higher Tuesday following a report suggesting the chipmaker had developed a new semiconductor it could sell to customers in China without violating new U.S. export restrictions.
The report from Reuters, later confirmed by the company, said the advanced A800 graphics processing unit (GPU) could be used in place of A100 chips made by Nvidia that are currently on the list of technologies banned from sale in China by the U.S. government.
Nvidia said in Securities and Exchange Commission filing in September that the new restrictions on the sale of its A100 and forthcoming H100 chips, which are also incorporated in other Nvidia-designed data center products, could put around $400 million sales — around 11% of expected data center revenues — at risk if its clients wouldn’t purchase alternative products.
Nvidia added that the launch of H100 chips, which was expected later this year, will likely be delayed as it transitions some of its operators out of China as a result of the U.S. government order.
Nvidia shares were marked 2.44% higher in pre-market trading to indicate an opening bell price of $146.50 each, trimming the stock’s six-month decline to around 13.4%.
Nvidia’s recent quarterly earnings, however, highlighted the group’s exposure to gaming sector weakness and underscored its summer warning of slower growth over the final months of the year.
Nvidia posted adjusted earnings of 51 cents per share for the three months ending in July, the group’s fiscal second quarter, well shy of the Street consensus forecast of $1.26 per share.
Data center revenues were pegged at $3.81 billion, Nvidia said, a 61% increase from last year. Revenues from gaming chips — which are also used in cryptocurrency mining — fell 33% from last year to $2.04 billion, a figure that also matched the group’s early August update and linked to Covid lockdowns in China and the impact of Russia’s war on Ukraine in Europe.
Looking into the current quarter, Nvidia said it sees revenues of around $5.9 billion, plus or minus 2%, compared to the Street consensus of $6.95 billion, with gross margins of around 65%, plus or minus 2%. Gaming weakness, Nvidia said, would be partly offset by firmer demand in its automotive and data center businesses.