Nvidia Falls Premarket After Reported Delay in Launching China-Focused Chip
Nvidia shares dropped in Friday's premarket after reports of delay in launching chips made specifically for China after new US restrictions.
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Nvidia (NASDAQ: NVDA) is reportedly delaying the launch of a new, China-focused artificial intelligence (AI) chip that was meant to bypass recent export restrictions imposed by the US government. The company’s shares fell 1.65% ahead of the market open on Friday.
Nvidia Expects to Ship New China-focused AI Chip in Q1 2024
According to Reuters, Nvidia has notified customers in China that it is delaying the rollout of a new artificial intelligence chip it developed to conform to US export rules after recent restrictions.
Notably, the tech giant will postpone the launch of H20 until Q1 2024, one of three China-focused chips the company designed in response to the restrictions. According to the report, the delay could affect Nvidia’s efforts to retain its market share amid intensifying competition from Huawei.
Shares of Nvidia fell more than 1.6% in premarket trading Friday.
The Santa Clara, California-based technology company initially expected to roll out new chips as early as November 16, per SemiAnalysis’s earlier report. However, the H20 is expected to hit the Chinese market sometime in the first quarter of next year. The report by Reuters said Nvidia’s launch could occur in February or March.
Its sources also suggested that the H20 was being delayed due to server manufacturers’ issues in integrating the chip. Alongside H20, Nvidia plans to launch two other chips, L20 and L2. The former is expected to launch within the original schedule, while no details were shared on the status of the L2.
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US AI Chip Export Restrictions
The delay comes roughly a month after the Biden administration announced it would take further steps to constrain the exports of high-end AI chips developed by Nvidia and other companies to China.
The move, aimed at preventing the chips from strengthening China’s military capabilities, was expected to deal the biggest blow to Nvidia. This is because the tech giant is the leading global manufacturer of best-in-class AI chips, which attracted unprecedented demand throughout 2023 as generative chatbots like ChatGPT took the tech space by storm.
Earlier this week, Nvidia unveiled its latest quarterly results, which, thanks to strong AI demand, again smashed Wall Street’s expectations. However, the chipmaker expects a negative impact in the current quarter due to chip restrictions.
Despite these concerns, analysts remain bullish on the company’s prospects, with Goldman Sachs, Morgan Stanley, and JPMorgan all raising their price targets on the stock after a blockbuster earnings report.
Do you think the newly announced delays could majorly impact Nvidia’s sales in the current fiscal quarter? Let us know in the comments below.
Tim Fries
Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firm specializing in sensing, protection and control solutions.
