NVIDIA AI GPU orders worth $5 billion threatened after new wave of US sanctions starting November 17
November 1, 2023

NVIDIA AI GPU orders worth $5 billion threatened after new wave of US sanctions starting November 17

NVIDIA reportedly intends to cancel orders for AI graphics processors worth up to 5 billion dollars, given the latest restrictions imposed by the US on China, reports Reuters.

The impact of the new US restrictions is beginning to show, with NVIDIA's share price falling to its lowest level since August on reports of order cancellations for AI graphics processors worth 5 billion dollars in China.

The administration of President Biden has a clear intention to suppress the rapid growth of the industry artificial intelligence in China by restricting the export of the most advanced chips to that country, creating an artificial shortage.

NVIDIA AI graphics processors H800s and A800s were already ready for the Chinese market

According to the US Secretary of Commerce, Gina Raimondo, the sanctions were imposed to stop China's “military” growth through artificial intelligence applications, and these actions are not aimed at “China's economy”. Under the new policy, China will be denied access to NVIDIA's AI graphics processors H800s and A800s, which were already subject to earlier US trade policies.

There are reports that NVIDIA will have to cancel orders worth nearly $5 billion with major Chinese companies such as Alibaba Group, ByteDance and Baidu. If true, the fallout from this canceled order will certainly be seen in NVIDIA's Q3FY24 earnings, which are expected on November 21st. However, given the huge demand for AI GPUs, NVIDIA may sell these GPUs elsewhere.

On the supplier side, the effect of the new restrictions is already starting to show, with the Wall Street Journal reporting that NVIDIA's stock price fell 5% following the announcement of the new policy. Shares fell as much as 20% after their record high on Aug. 31, indicating that the U.S. decision will have an impact on the industry's leading suppliers.

Demand for NVIDIA's AI chips has a large share of the Chinese consumer market and a significant share of total revenue. Discontinuing the supply of AI chips in China will result in a direct impact on NVIDIA's revenue from that region and lead to a “major” economic recession.

Unfortunately, apart from the AI ​​chips, NVIDIA GeForce RTX 4090 it is also “forced” by the new US policy, and starting November 17th, NVIDIA's GeForce RTX 4090 graphics processors will be completely banned for export to China.

NVIDIA is said to have started increasing shipments of its AD102 chipswhich are used in graphics cards like the RTX 4090 in China so that its manufacturing partners can fill as much stock as possible before the ban takes effect, as the flagship Ada GPU is still in high demand in the Chinese industry.

Pulling technology and other industries into political circumstances is something that is disappointing to see, as it significantly hinders the process of innovation. We hope they will conflict between the USA and China be resolved in the future.