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Morningstar‘s Stock Analysis NVDA

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Latest U.S. Govt. License Requirement for Nvidia’s Data Center GPUs Sold to China Could Be Troubling

Abhinav Davuluri, CFA Sector Strategist

Analyst Note

| Abhinav Davuluri, CFA |

On Aug. 26, Nvidia announced that the U.S. government imposed a new license requirement for certain Nvidia data center graphics processing units, or GPUs, (the current generation A100 and upcoming H100) exported to China or Russia. We note Nvidia hasn't been selling products to customers in Russia since the outset of the Russia-Ukraine war. Nvidia’s major cloud customers include Chinese firms such as Alibaba, Tencent, and Baidu for a variety of applications such as natural language processing, image recognition, and deep recommendation engines. The purpose of the new license agreement is to address risks related to military end use for Nvidia’s AI-related GPUs in the escalating U.S.-China tensions. In an SEC filing, Nvidia highlighted its fiscal third-quarter revenue outlook included about $400 million in potential revenue to China that could be subject to the new license requirement. We believe many of the end use applications for Nvidia’s data center GPUs at Chinese customers are consumer-centric, and thus we think the firm should be able to attain licenses for these customers.

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Company Profile NVDA

Business Description

Nvidia is the top designer of discrete graphics processing units that enhance the experience on computing platforms. The firm's chips are used in a variety of end markets, including high-end PCs for gaming, data centers, and automotive infotainment systems. In recent years, the firm has broadened its focus from traditional PC graphics applications such as gaming to more complex and favorable opportunities, including artificial intelligence and autonomous driving, which leverage the high-performance capabilities of the firm's products.

2788 San Tomas Expressway
Santa Clara, CA, 95051
T +1 408 486-2000
Industry Semiconductors
Most Recent Earnings Jul 31, 2022
Fiscal Year End Jan 29, 2023
Employees 22,473