Nvidia, the leading graphics processing unit (GPU) manufacturer, has reported growth in its revenue from China despite US export controls imposed on advanced semiconductor technology. While the revenue has not yet reached pre-control levels, it signifies a positive trend for the company in the crucial Chinese market.
During the company’s second-quarter earnings call, Nvidia CFO Colette M. Kress revealed that the company’s data center revenue in China had increased sequentially. This growth significantly contributed to the overall revenue, indicating a strong demand for Nvidia’s products in the region. However, Kress emphasized that this revenue, as a percentage of the total data center revenue, remains lower than what it was before the export controls were implemented. She also highlighted the intensifying competition within the Chinese market, signaling the challenges Nvidia faces in regaining its previous market share.
Addressing concerns about the geographical implications of the revenue figures, Kress clarified that the reported numbers reflect where the invoices are sent, not necessarily the final destination of the products. She explained that the Chinese revenue encompasses sales in gaming, data center, and automotive sectors.
Nvidia’s CFO also expressed optimism about the future, stating that they anticipate continued growth of the Hopper architecture in the second half of the year. The company is particularly hopeful about the Blackwell architecture, expecting it to drive revenue growth in the fourth quarter. The Blackwell series includes a new AI chip designed to comply with US export controls, specifically targeted at the Chinese market. This chip is expected to be mass-produced later this year, offering Nvidia a pathway to regain market share in China.
The US government’s export controls aim to prevent China from obtaining advanced chips that could bolster its military capabilities and accelerate the development of cutting-edge technologies like artificial intelligence and hypersonic missiles. However, reports emerged earlier this year suggesting that Chinese entities have found ways to circumvent these restrictions by accessing Nvidia’s AI chips through cloud services. This development underscores the challenges posed by these export controls in the long term.
Despite the US restrictions, Chinese tech giants like Alibaba and Tencent have continued to invest heavily in artificial intelligence. This underscores the ongoing demand for AI technology within China, a market Nvidia is determined to tap into.
Nvidia’s second-quarter revenue exceeded Wall Street’s expectations, driven largely by strong sales in the data center segment. However, the company’s gross margin narrowed compared to the first quarter. As of the time of writing, Nvidia shares have dropped by 6.89% in after-hours trading, reaching $116.95. The company’s stock closed Wednesday’s session at $125.61, down 2.10%, according to Benzinga Pro data.
