NVIDIA (NVDA) – Get a free report Shares rose in early trading Wednesday after the artificial intelligence chip maker criticized the Street’s profit forecasts but warned that new U.S. restrictions on technology exports would cause a “significant” hit to its overall sales in China.
Nvidia CFO Colette Kress said sales in China, which account for 20% to 25% of the group’s total revenue, would likely slow during the current quarter as a result of new export restrictions imposed. by the US government last month, with the aim of limiting Beijing’s capabilities. access to ai and other high-tech equipment.
However, it noted that the decline would be largely offset by gains in other regions where demand for chips that power ai-related technologies remains strong.
However, the warning offset the impact of another impressive quarterly earnings report, which showed Nvidia posted an adjusted bottom line for the three months ending in October of $4.02 per share, more than triple the same period in the year. last year and much later. from the Wall Street consensus forecast of $3.37 per share.
Group revenue, Nvidia said, soared 205% from last year to $18.12 billion, a figure that also beat analyst estimates of $16.2 billion, with data center revenue up 41% from the previous quarter to a record of $14.5 billion. Overall profit margins were pegged at 74%, beating estimates of around 72.5%.
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Looking ahead to the current quarter, Nvidia expects revenue of around $20 billion, up 2% or so, a figure that firmly exceeded the Wall Street consensus of around $17.2 billion, with gross margins in the region of 74.5% and 75.5%.
Still, Kress’s China warning appears to curb gains in the market’s hottest tech stocks heading into Wednesday’s trading.
“We had historically seen in recent quarters that China and some of the other impacted destinations represented about 20% to 25% of our data center revenue,” Kress told investors on a conference call Tuesday night. “We expect this to decline substantially in our guidance as we move into the fourth quarter. Export controls will have a negative effect on our business in China, and we do not have good visibility into the magnitude of that impact, even over the long term. “
“However, we are working to expand our data center product portfolio to possibly offer new regulatory compliance solutions that do not require a license,” he added. “These products may be available in the coming months. However, we do not expect their contribution to be material or significant as a percentage of revenue in the fourth quarter.”
Nvidia shares rose 1.2% in premarket trading to indicate a Wednesday opening price of $505.38 each, just shy of the all-time high of $505.48 it hit earlier this year. week and a move that would reduce the stock’s gain so far this year. to around 253%.
The impact on the group’s revenue in China may be cushioned by the launch earlier this month of Nvidia’s new H200 chip, which it says will be faster and offer more memory to power both the generative ai and large language models it its predecessor H100.
The new chips, expected to ship in early 2024, will also make it easier for customers to run ai applications on Google Cloud using Nvidia-made chips with deeper integration between hardware and software offerings.
Nvidia at the end of August announced a partnership with Google (GOOGLE) – Get a free report which seeks to leverage its cloud offering to customers, using Nvidia chips and its DGX supercomputing platform, to essentially create a new market for ai as a service for thousands of businesses around the world.
The group is also expanding its reach into the PC market, where rival Intel (INTC) – Get a free report occupies the leadership position. Reports suggest that he will use technology from Arm Holdings to design central processing units that will run the Microsoft MSFT operating system.
Nvidia was one of Arm’s biggest financial backers ahead of September’s IPO and attempted to buy the group before being thwarted by UK regulators last year.
“80% of ai chip consumption comes from large hyperscalers throughout this current ai data center buildout, Nvidia’s higher guidance of $20 billion for the next quarter shows continued demand for ai data centers.” data over the next year for H100 as the ai sector grows,” said Lucas “Keh, a semiconductor analyst at global research firm Third Bridge. Our experts expect cloud players to consume between 500,000 and 600,000 H100s in 2024”.
“And despite the challenges and restrictions in the Chinese market, the continued sales growth can be attributed to its ability to continue selling with the new line of ai chips: H20 L20 and L2,” he added.
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