Anonymous Portugal

NVIDIA is reportedly going to cancel AI GPU orders worth up to $5 Billion in light of the latest restrictions imposed by the US on China, reports Reuters.

The Biden administration has clear intentions to suppress the rapid growth of the AI industry in China, by restricting the export of cutting-edge chips to the nation, creating an artificial shortage.

According to U.S. Commerce Secretary Gina Raimondo, the sanctions are in place to thwart the "military" growth of China through artificial intelligence applications, and the actions taken in no way are directed towards the "Chinese economy". Under the new policy, China will be blocked from accessing NVIDIA's H800s and A800s AI GPUs, which were already cut-down variants previously developed by NVIDIA to comply with the "older" US trade policies.

There are reports that NVIDIA will have to cancel orders worth almost $5 Billion US with major China-based companies such as Alibaba Group, ByteDance & Baidu, to name a few. If true, the implications of this order cancellation will definitely be seen in NVIDIA's upcoming earnings for Q3FY24 which are expected on the 21st of November. However, given the huge demand for AI-based GPUs, NVIDIA can offload these $5 Billion worth of GPUs elsewhere.

Now, at the supplier's end, the effect of the new curbs has started to show colors, as the Wall Street Journal reports that NVIDIA's share price has dropped by 5%, after the announcement of the new policy. Shares have dropped by a massive 20%, after its record high on August 31, which shows that the US's decision will have an impact on the industry's leading suppliers.

NVIDIA's AI chip demand has a large portion of the Chinese consumer base and holds a fair share in terms of overall revenue. Cutting off the supply of AI chips in China would result in a direct impact on the revenue of NVIDIA from the region, resulting in a "huge" economic downturn.

Apart from the AI chips, unfortunately, NVIDIA's GeForce RTX 4090 has also been "forced into" the new US policies, and starting from the 17th of November, NVIDIA's GeForce RTX 4090 GPUs will be completely banned from exports to China. It is reported that NVIDIA has begun to increase the shipments of its AD102 chips, which are used in graphics cards such as the RTX 4090, to China so that its manufacturing partners can stock up as much inventory as possible prior to the ban since the flagship Ada GPU still has great demand in the Chinese industry.

Dragging tech and other industries into political circumstances is something disappointing to see since it significantly "hinders" the innovation process. We do hope that the US-China conflict settles in the future.