Nvidia outlines additional risks associated with China, yet CEO praises Trump's administration.
Nvidia Warns of Risks Amid US-China Tech Conflict
In a quarter marked by robust sales growth, Nvidia, a leading artificial intelligence (AI) chip designer, has cautioned about potential risks to its business arising from the ongoing tech conflict between the United States and China.
The company's latest quarterly filing with the US Securities and Exchange Commission revealed concerns over restrictions on the use of open-source AI models from China, such as DeepSeek and Qwen, and US regulations restricting connected vehicle technology from China - a market where Nvidia's long-struggling auto chip business has finally seen growth.
During a conference call with analysts, Nvidia CEO Jensen Huang praised President Donald Trump's decision to rescind an export rule implemented by former president Joe Biden, which would have regulated Nvidia's global chip flow. However, the company's filing indicated that no new rule had been issued, and a potential replacement rule could impose new restrictions on Nvidia's products or operations.
The ongoing tensions between the US and China have taken a toll on Nvidia's business. Export restrictions enacted by the Trump administration last month have prevented Nvidia from selling its H20 chip designed for the Chinese market, which Huang deemed "a springboard to global success." These restrictions caused a $2.5 billion loss in sales during the first quarter, and the company expects another $8 billion hit in the second quarter.
Sales of the H20 chip in China generated $4.6 billion in revenue for Nvidia, accounting for 12.5% of total revenue. Despite these setbacks, Nvidia forecasts second-quarter sales of $45 billion, with incremental growth of about 50% from the previous year.
Looking ahead, Nvidia's leadership is optimistic about potential deals worth billions of dollars in Saudi Arabia, the United Arab Emirates, and Taiwan. These agreements could counterbalance the impact of the US-China trade tensions, leading analysts to conclude that the situation may not be as dire as initially feared.
Nvidia's CEO emphasized the importance of US platforms supporting collaboration with top global developers, including those in China, to maintain a competitive edge in the global AI industry. He noted that US firms benefit from insights gained by keeping Chinese open-source models, such as DeepSeek and Qwen, running on Nvidia chips.
In the face of geopolitical challenges, Nvidia is developing compliant hardware for China, although these may lack critical features like high-bandwidth memory (HBM). The company's future growth prospects are uncertain, with competition from domestic Chinese chips, supply chain risks, and potential data center business risks looming large. Investors are advised to exercise caution and wait for stability in trade relations before considering Nvidia as a viable investment option.
- The ongoing tech conflict between the US and China has led to concerns about Nvidia's business, particularly restrictions on the use of open-source AI models like DeepSeek and Qwen from China.
- As Nvidia's leadership looks ahead, they are optimistic about potential deals in countries like Saudi Arabia, the United Arab Emirates, and Taiwan, which could help counterbalance the impact of politics and trade tensions with China on their business.
