Nvidia drops after U.S. prohibits sales of some of its products to China

Aug. 31, 2022 9:02 PM ETNVIDIA Corporation (NVDA), AMDAMAT, LRCX, KLAC, SMICYBy: Joshua Fineman, SA News Editor144 Comments

Semiconductor Maker Nvidia Reports Quarterly Earnings

Justin Sullivan

Nvidia (NASDAQ:NVDA) fell 6.6% in after hours trading after the company warned that U.S. restrictions on exports of some of its products to China may hurt sales.

Nvidia disclosed late Wednesday that the company was informed on Friday that the U.S. has imposed a new license requirement for any future export to China (including Hong Kong) and Russia of the company’s A100 and forthcoming H100 integrated circuits, according to an 8-K filing.

Nvidia (NVDA) said that its outlook for its fiscal third quarter, which included $400 million in potential sales to China, may be subject to the new license requirement if customers don't want to purchase the company’s alternative product offerings or if the U.S. doesn't grant licenses in a timely manner or denies licenses to significant customers.

The U.S. government "indicated that the new license requirement will address the risk that the covered products may be used in, or diverted to, a ‘military end use’ or ‘military end user’ in China and Russia," Nvidia said in the filing.

Nvidia (NVDA) warned that the new license requirement may impact the company's ability to complete its development of H100 in a "timely manner" or support existing customers of A100 and may require Nvidia (NVDA) to transition certain operations out of China.

Advanced Micro Devices (NASDAQ:AMD) also warned that it received a similar note from the U.S. government, though it doesn't see a material impact, according to a Bloomberg report, which cited an AMD statement. AMD fell 3.8% in after hours trading on Wednesday.

"At the time, we do not believe that shipments of MI100 integrated circuits are impacted by the new requirements," according to the statement.

The Nvidia China disclosure comes after a Reuters report last month that the Biden Administration is going over new sanctions to stop sending certain chip equipment tools to China to make advanced semiconductors. The Commerce Department is trying to figure out how to ban exports of tools that are sent to factories for Semiconductor Manufacturing International Corp. (OTCQX:SMICY) or SMIC, to prevent them from making semiconductors at 14-nanometer node and smaller.

In December, it was reported that the Biden administration was evaluating imposing tougher sanctions on SMIC (OTCQX:SMICY), China's largest chipmaker, which have limited the ability of chip equipment companies to sell inside the country, including Applied Materials (AMAT), KLA Corp. (KLAC) and Lam Research (LRCX).

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