Nvidia Shares Sink On Report Of $5bn China AI Chip Cancellations

Nvidia may be forced to cancel orders of advanced AI chips worth up to $5 billion (£4bn) intended for Chinese customers due to tightened US government export restrictions, the Wall Street Journal reported.

The company said in a regulatory filing last week that the US government had ordered it to halt shipments of certain chips to China immediately, rather than waiting for a deadline of 15 November when new export controls had been set to kick in.

The Journal said the government order affects Nvidia’s A800 and H800 chips, which were specifically designed for the Chinese market following restrictions introduced last October.

The order also reportedly affects the L40S chip, one Chinese firms had ordered as a safeguard in case new restrictions were brought in targeting the A800 and H800 GPUs.

Order cancellations

The A800 and H800 were developed as cut-down versions of Nvidia’s flagship A100 and H100 chips to comply with US restrictions.

Nvidia had planned to deliver some of the Chinese orders before the 15 November deadline, the Journal report said.

The Chinese customers in question reportedly include Alibaba, ByteDance and Baidu, three of China’s biggest technology companies.

Nvidia’s stock sank as low as $392.90 on the news, down 4.7 percent and its lowest level since mid-June, before recovering in mid-morning US trading to around 2 percent down.

Financial impact

In a statement Nvidia reiterated its assertion in the regulatory filing last week that its products are in strong demand worldwide and that it didn’t expect the accelerated timing of the licensing requirements to have a “near-term meaningful impact” on its financial results.

The new rules, introduced by the US earlier this month, include restrictions on sales to countries including Iran and Russia.

Strong demand for Nvidia’s products amidst a boom in AI development saw the company’s market capitalisation surge over $1tn in May, but as of mid-morning US trading it had fallen to around $995bn.