Nvidia (NVDA) on Wednesday reassured investors that potential export restrictions on chips wouldn’t hurt the semiconductor firm’s bottom line — reaffirming our view that the Club name is an “own it, don’t trade it” stock. The chipmaker does not expect an immediate impact on earnings if the U.S. government were to impose tougher export controls on sending artificial intelligence chips to China, CFO Colette Kress said Wednesday. “Given the strength of our demand for our products worldwide, we do not anticipate that such additional restrictions, if adopted, would have an immediate material impact on our financial results,” Kress said Wednesday during a Piper Sandler conference . The weakness in Nvidia’s stock — down around 1.8%, at $411 a share, in late trading Wednesday — may prove temporary as a result. Nvidia’s problem lately hasn’t been demand, amid surging interest in generative AI and large-language models. The issue has been creating enough supply to keep pace with the orders coming in. The CFO’s comments came after The Wall Street Journal reported late Tuesday that the Commerce Department could implement stricter measures around the export of AI chips to China and other countries of concern as early as July. The potential restrictions would strengthen the export controls implemented last year by the Biden administration, requiring Nvidia to obtain a license before shipping its cutting-edge A100 and H100 data-center chips to customers in China and Russia. Washington has said its semiconductor restrictions are rooted in national security concerns and designed to prevent the Chinese military from obtaining advanced chips. Nvidia in response developed the A800 and H800 variants, throttling back performance just enough to skirt the licensing requirement. The new restrictions under consideration would require Nvidia to obtain a license to sell even the kneecapped versions of its high-end chips, according to the Journal. Additional export controls wouldn’t change the fact Nvidia’s technology is at the center of the AI boom. That has lead to a spike in demand for its chips in recent months and pushed its stock up more than 180% year-to-date. Indeed, a steep increase in orders tied to generative AI and large-language models allowed Nvidia in May to issue jaw-dropping second-quarter guidance . NVDA YTD mountain Nvidia’s stock performance so far in 2023. In Nvidia’s first quarter, data-center sales accounted for 60% of companywide revenue. And sales to China have comprised 20% to 25% of Nvidia’s overall data-center revenue, Kress said Wednesday. Still, over the long term, Nvidia’s future business would feel an impact from strict export controls on AI chips, Kress acknowledged. Such a policy would “result in a permanent loss of opportunities for the U.S. industry to compete and lead in one of the world’s largest markets,” she said. The government’s initial licensing requirements last year extended to products made by fellow Club holding Advanced Micro Devices (AMD), but the company said at the time that it didn’t expect a material impact to its business. Our thesis in AMD has not rested on AI, given Nvidia’s dominance in the field , though we do expect the company to play a role in the market in the future. For now, AMD’s ability to execute in the traditional data-center compute business and capture additional share from Intel (INTC) is key to its prospects. AMD did not immediately respond to CNBC’s request for comment on Wednesday. (Jim Cramer’s Charitable Trust is long NVDA, AMD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Nvidia’s A100 GPU is shows at Nvidia’s headquarters in Santa Clara, CA, on February 9, 2023.
Katie Tarasov
Nvidia (NVDA) on Wednesday reassured investors that potential export restrictions on chips wouldn’t hurt the semiconductor firm’s bottom line — reaffirming our view that the Club name is an “own it, don’t trade it” stock.