Nvidia Continues to Warn Against Stronger China Chip Controls

American chipmaker Nvidia continued to raise alarms this week about the potential of additional export restrictions on the U.S. semiconductor industry, saying new rules will hurt its long-term sales to China.

Colette Kress, the company’s CFO, said the Commerce Department’s current restrictions on China-related chip exports and services, released in October (see 2210070049), are “achieving the intended result” of restricting sensitive exports to China. Commerce is considering expanding those restrictions when it finalizes its October rule in the coming months (see 2307260071), which could target a broader range of Nvidia’s products, including its A800 chip, a product unveiled by the company in November that was designed to comply with U.S. new export controls (see 2211080005).

Kress, speaking during a second quarter earnings call this week, said Nvidia doesn’t expect those new rules, including broader restrictions on the company’s datacenter graphics processing units, to have an “immediate material impact” on the firm’s financial results. She specifically pointed to the “strength of demand for our products worldwide.”

But over time, she said, those additional export restrictions could hurt its standing in the Chinese market. “Over the long term, restrictions prohibiting the sale of our data center GPUs to China, if implemented, will result in a permanent loss of an opportunity for the U.S. industry to compete and lead in one of the world's largest markets.”

Kress’ comments, similar to remarks made earlier this year (see 2306290048), came as Commerce considers ways to tighten its rules to prevent companies from finding ways to circumvent the China restrictions (see 2306200018 and 2305300074).

But Nvidia this week remained confident that demand would remain strong over the near term. Kress said demand from China made up about 20% to 25% of its datacenter revenue during the last quarter, and CEO Jensen Huang said the company also is seeing high levels of demand in other areas.

“The easiest way to think about the demand is the world is transitioning from general purpose computing to accelerated computing,” he said. “The best way for companies to increase their throughput, improve their energy efficiency, improve their cost efficiency, is to divert their capital budget to accelerated computing and generative [artificial intelligence].”