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NVIDIA warns of 'permanent loss' risk over chip sales curbs on China

Zhu Shenshen
China now accounts for 20 percent to 25 percent of data center revenue for chip giant NVIDIA, which has issued a warning over the United States' chip sales restrictions on China.
Zhu Shenshen

Chip giant NVIDIA, which posted higher-than-expected business results in the second quarter, has warned that chip sales restrictions to China will result in a "permanent loss of an opportunity for the US industry."

The company issued the warning during a conference call on Thursday.

NVIDIA revenue hit US$13.51 billion in the quarter, surging 101 percent from a year ago. Its earnings were US$2.70 per share, up a whopping 429 percent year on year, and beating analysts' expectations of about US$2.07 per share.

The United States-based company attributed the business growth to "tremendous demand" for accelerated computing and generative artificial intelligence, fueled by applications like ChatGPT and Microsoft's Copilot.

NVIDIA officials talked about the US chip restriction policy on China during the conference call with analysts, attended by Chief Executive Officer Jensen Huang and Chief Financial Officer Colette Kress.

"Restrictions prohibiting the sale of our data center GPUs (graphics processing units) to China, if implemented, will result in a permanent loss of an opportunity for the US industry to compete and lead in one of the world's largest markets," Kress pointed out.

It echoed a previous statement released by the US Semiconductor Industry Association (SIA).

"Allowing the industry to have continued access to the China market, the world's largest commercial market for commodity semiconductors, is important to avoid undermining the positive impact of (the Chips and Science Act)," the SIA said in July.

NVIDIA warns of 'permanent loss' risk over chip sales curbs on China
Ti Gong

More than 100 computers with NVIDIA RTX 40 series GPUs are used in a game-play event in Hangzhou, for an highly anticipated Chinese title Black Myth: Wukong.

Huge market demand for AI and gaming

China now accounts for 20 percent to 25 percent of NVIDIA's data center revenue, which reached US$10.32 billion in the quarter, soaring 171 percent from a year ago.

The world has about US$1 trillion worth of data centers, indicating a quarter of trillion dollars of capital spend each year.

"We are seeing some of the earliest applications of generative AI in marketing, media, and entertainment," said Huang, who suggested that the company's growth will continue in the future.

In the consumer market, NVIDIA expects business to grow, fueled by GeForce RTX 40 series GPUs for laptops and desktops, with global end demand rebounding following last year's slowdown.

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