Nvidia Corporation NVDA is one of the most successful insiders to the semiconductor boom. It came crashing down after issuing very bad news regarding new export restrictions and a major quarterly charge. Nvidia’s stock fell over 6% in after-hours trading. Investors see increasing regulatory pressures as an obstacle to the company’s long-term growth prospects.
Nvidia has called a $5.5 billion charge because of its H20 graphics processing units (GPUs). These GPUs have been a disaster for export to China and other foreign foes causing the company’s performance to tank. This step is the result of a recent U.S. federal government directive. Specifically, Nvidia has to apply for a license to export these chips to any country, China included. Nvidia designed the H20 chip expressly to meet U.S. export controls. The new restrictions could stop the company from being able to take advantage of this otherwise lucrative market.
As you may know, last year, Nvidia’s H20 chip produced absolutely record-breaking revenue for the company, between $12 billion and $15 billion. This enormous number underscores the chip’s importance in driving the company’s financial success. Nvidia’s recent 10-Q makes it clear how threatened its overall growth may be. The latest and growing restrictions on chip exports will probably prove the most consequential. There’s no doubt that market analysts are watching the developments very closely. Nvidia’s stock futures fell roughly 0.5% in after-hours trading shortly after 6 p.m. ET, illustrating the continued concern of investors.
These advances go well beyond Nvidia. Indeed, they shed light on some of the most important trends going on in the tech industry and international trade today. The semiconductor industry, even before the pandemic, had been struggling with other market factors, such as supply chain crises and geopolitical friction. Governments around the globe are increasingly imposing strict exporting technology related regulations. Therefore, firms such as Nvidia can expect to face higher obstacles to retaining their key advantage.
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