The latest U.S. export restrictions on high-end chips may force Nvidia (NASDAQ:NVDA) to cancel billions of dollars worth of orders to China due next year, the Wall Street Journal reported, citing people familiar with the matter.
The company already delivered advanced AI chip orders to China earmarked for this year, and had planned to deliver next year’s orders before the new curbs became effective in mid-Nov. However, the Biden administration informed Nvidia (NVDA) last week that the export controls were effective “immediately.”
Alibaba (BABA), TikTok owner ByteDance (BDNCE) and Baidu (BIDU) had all made large orders for delivery in 2024, according to the sources cited by the report. Next-year orders from major Chinese firms is said to have exceeded $5B.
Nvidia (NVDA) is pursuing additional supply and plans to allocate its advanced AI computing systems, which use graphics chips impacted by the curbs, to customers in the U.S. and abroad, a company spokesperson said. It also stopped taking new AI chip orders from China.
Note that the new curbs require any company making AI chips that exceed a performance benchmark to seek a license from the U.S. Commerce Department before exporting to China and other countries of concern.
Nvidia (NVDA) is expected to be the most affected, as its AI chips are the most advanced and widely deployed. The chipmaking giant does not expect a near-term meaningful impact on its results, given the worldwide demand for its products.
But analysts expect sales to be impacted over the long term. “… the broad-based license requirements in the gray area create more material uncertainty for a region driving 20%-25% of demand,” Morgan Stanley had warned.