Nvidia warns of sales hit from new US chip licensing requirements for China

Nvidia Corp.

NVDA -2.42%

could lose up to $400 million in quarterly sales after the U.S. imposed new licensing requirements on shipments of some of its most advanced chips to China, the chipmaker said Wednesday.

Nvidia, the largest U.S. chipmaker by market value, said in a regulatory filing that it was told on Friday that it would be required to get permission from the U.S. government before shipping some cutting-edge chips to China and Russia.

The company does not sell brands in Russia, he said, but the restriction in China could affect its outlook for sales of about $5.9 billion in the current quarter. The company was in talks with Chinese customers to fulfill planned purchases with other products and may seek government permits if replacements were not sufficient, he said.

The US imposed the requirement to address the risk of these products falling into the hands of military users in China and Russia, Nvidia said in its filing.

The rule is not limited to Nvidia and sets a performance limit on chips that handle advanced artificial intelligence calculations that are becoming increasingly important to businesses, governments and militaries, according to an industry official. Nvidia dominates the market for these types of chips.

sophisticated micro devices Inc.

AMD -2.38%

said it has also been alerted to the new licensing demand, which prevented it from shipping an advanced chip aimed at the artificial intelligence and high-performance computing markets. The company said it does not expect a significant impact on its operations.

The new licensing requirements come at a difficult time for chip makers. Demand for personal computers, video games and smartphones, among other gadgets, has slowed as inflation rises and the economic outlook worsens, squeezing people’s ability to spend.

Shares of Nvidia fell more than 5% in after-hours trading on Wednesday.

Earlier in August, Nvidia reported revenue of $6.7 billion for the quarter ended July 31, about 17% lower than the $8.1 billion it forecast in May, amid a 33% drop in gaming revenue in 2 .04 billion dollars.

Intel Corp.

INTC -1.05%

In July it reported a surprise quarterly loss and cut its full-year outlook, reflecting a slump in PC purchases and product delays.

Nvidia’s chips affected by the licensing rule include its A100, a powerful chip introduced two years ago that is used in large data centers to run artificial intelligence calculations. The company’s so-called H100 chips, a more advanced AI chip announced this year, are also affected, he said.

A spokesman for the US Commerce Department, which handles export restrictions, did not immediately respond to a request for comment.

Restrictions on US trade with China and Chinese chipmakers have become common in recent years as tensions between the countries have escalated. The US has also sought to halt exports of chip-making equipment to China to thwart the country’s ambition for chip factory dominance.

US export limits have put a damper on the expansion of key Chinese chipmakers, including the largest, Semiconductor Manufacturing International Corp.

981 2.46%

They have also made it difficult for China to acquire advanced chips from contract manufacturers such as Taiwan Semiconductor Manufacturing Co.

TSM 0.68%

the largest in the world.

A new $52 billion push under President Biden to boost U.S. chip production included provisions barring grant recipients from building advanced factories in China.

Earlier restrictions on chip sales in China have dented sales for US companies, particularly after US telecom giant Huawei Technologies Co. added to the export blacklist in 2019. However, the licensing requirements Nvidia is subject to could have a greater impact than usual on a single company, potentially changing the competitive landscape.

The Santa Clara, Calif., company said rivals could benefit even if the U.S. subsidies required export approvals. “The licensing process will make our sales and support efforts more cumbersome, less certain, and encourage customers in China to seek alternatives to our products, including semiconductor suppliers based in China, Europe and Israel,” Nvidia said in a regulatory filing.

Nvidia said the rules prevented the company from shipping any future chips that hit unspecified performance limits similar to the A100s without first obtaining a license. The company would also need a license to support or develop products subject to the restriction. Those requirements, he said, may affect its ability to complete development of the H100 on time and may require it to move some operations out of China.

Write to Asa Fitch at asa.fitch@wsj.com

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