Why China and Israel darken Nvidia’s future
Nvidia's fourth-quarter 2023 earnings forecast beats analysts' estimates. The company continues to develop advanced microchips for artificial intelligence, but the situations in China and Israel raise some doubts. All the details
Nvidia, the largest microchip company by market capitalization, expects revenue of $20 billion for the current quarter, much more than analysts had estimated ($17.8 billion, according to a survey by the London Stock Exchange Group). Despite the overall good results, however, the company expects a sharp decline in sales in China due to American restrictions. The situation in Israel could also impact the results.
THE IMPACT OF CHINA
China is an important source of revenue for Nvidia, which has a dominant position in the global market for semiconductors – graphics processing units, specifically – for artificial intelligence. But US controls on microchip exports to China are becoming increasingly stringent: the latest restrictions , introduced last month, also concern some products that the company had developed specifically for the Chinese market, "weakening" the advanced devices already subject to commercial restrictions.
In recent quarters, Reuters reports, sales of the now-restricted chips have been worth nearly a quarter of Nvidia's data center sales. The company's chief financial officer, Colette Kress, said in this regard that "export controls will have a negative effect on our operations in China, and we do not have good visibility on the magnitude of the long-term impact." Kress added that Nvidia is developing new chips for the Chinese market that comply with new US export regulations, but for timing reasons these devices will not be able to contribute to fourth-quarter 2023 revenue.
THE RISKS IN ISRAEL
Nvidia's results could also be affected by the situation in Israel and the Gaza Strip, given the company's robust presence in Israel, where it is working on developing an artificial intelligence supercomputer .
Nvidia said a significant portion of its employees in Israel have been recalled to military service and that their prolonged absence, if the war against Hamas continues for a long time, could negatively impact operations in the country.
ALL NVIDIA FORECASTS FOR THE FOURTH QUARTER
Nvidia expects an adjusted gross margin of 75.5 percent in the fourth quarter of the year, higher than the 72.6 percent estimated by analysts.
The company also expects an improvement in the supply of chips for artificial intelligence, for which there is indeed strong demand: according to a TrendForce study, orders for these devices will increase by almost 40 percent this year . Last week, however, Nvidia introduced a new microchip for artificial intelligence, the H200, which offers superior performance to that of its most advanced processor, the H100, especially when it comes to high-bandwidth memory ( fundamental, because it indicates the amount of data that the device can process quickly).
In the third quarter, adjusted revenues tripled to 18.1 billion dollars (estimates stood at 16.1 billion); revenue from the data center business amounted to 14.5 billion, while revenue from the gaming unit amounted to 2.8 billion.
For the current quarter, Nvidia expects revenue of approximately $20 billion.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/innovazione/nvidia-previsioni-quarto-trimestre-2023/ on Wed, 22 Nov 2023 09:39:19 +0000.