Nvidia announces: Both H100 and A100 have been authorized

After announcing earlier that the company's A100 and H100 exports to China require a U.S. license, NVIDIA issued a new announcement late yesterday. According to the announcement, the U.S. government has authorized NVIDIA to develop H100 integrated circuits. export, re-export and domestic transfer. The authorization also gives the company until March 1, 2023, to perform exports required to support U.S. customers of the A100. In addition, the U.S. government has authorized Nvidia to fulfill and logistics for A100 and H100 orders through the company's Hong Kong factory until September 1, 2023.

(Original English text: The US government has authorized exports, reexports, and in-country transfers needed to continue NVIDIA Corporation's, or the Company's, development of H100 integrated circuits after the Company filed its Current Report on Form 8-K with the US Securities and Exchange Commission on August 31, 2022. The authorization also allows the Company to perform exports needed to provide support for US customers of A100 through March 1, 2023. Additionally, the US government authorized A100 and H100 order fulfillment and logistics through the Company's Hong Kong facility through September 1, 2023.)

According to CNBC, Nvidia said on Thursday that the U.S. government will allow it to continue developing its H100 artificial intelligence chip in China. It's a win for the company after warning on Wednesday that new export restrictions could hamper its operations in the country.

Nvidia said in a filing with the U.S. Securities and Exchange Commission on Wednesday that the U.S. government is restricting sales of its A100 and H100 high-performance artificial intelligence chips for servers to China and Russia. Sales of both chips are still limited in these markets, although it is still possible to develop the H100 in China. Nvidia expects the new export restrictions to cost $400 million in revenue this quarter.

The company's stock fell nearly 9% in Thursday trading.

"The U.S. government has authorized exports, re-exports, and domestic transfers necessary to continue development of H100 integrated circuits by Nvidia Corporation or companies," Nvidia said in a filing Thursday.

The H100 is Nvidia's upcoming enterprise AI chip, which was previously expected to ship by the end of this year. Some of its research and development takes place in China. The A100 is an older model, having been shipping for three years. They are both graphics processors that can be used in supercomputing and artificial intelligence.

Nvidia's data center business, which includes sales of the A100 and H100, is one of the company's fastest-growing segments, with sales of $3.8 billion in the June quarter, an annualized rate of 61%.

However, Nvidia CEO Jensen Huang warned analysts in August that Chinese cloud computing companies were slowing down the pace of building data centers and that China was a "very large market" for the company. Nvidia said on Thursday it could continue shipping AI chips from its Hong Kong factory until September 2023.

"Chinese hyperscalers and Chinese internet companies have really, really slowed down their infrastructure investment this year, especially from the beginning - they were building quite slowly and it slowed down in the second quarter," Huang said.

Some analysts believe Nvidia can mitigate the impact of new export restrictions by working with the government, although it's unclear whether the Chinese government will retaliate with a ban of its own.

"While the export ban presents potential near- and medium-term risks, NVIDIA is working closely with the [U.S. government] to address the situation, and we believe the U.S. government is fully aware of the critical/strategic importance of NVIDIA's accelerated computing platforms to the global technology industry," JPMorgan analyst Harlan Sur wrote in a note Thursday.

The Commerce Department said the new export restrictions were related to national security but did not respond to follow-up questions about whether it would clarify or change its policy on Nvidia.

"While we cannot outline specific policy changes at this time, we are taking a comprehensive approach to implement additional actions related to technology, end uses and end users to protect U.S. national security and foreign policy interests," a Commerce Department representative said Wednesday.

AMD also said on Wednesday that it had received new licensing requirements from the U.S. Commerce Department but did not expect them to have a significant impact on its business due to the lower exposure of its China operations. AMD's shares fell more than 4% in Thursday trading.

On August 31, the U.S. chip design company NVIDIA said that it was requested by the U.S. government to restrict the export to China of the two latest generation flagship GPU computing chips A100 and H100, which are used to accelerate artificial intelligence tasks. On September 1, the Ministry of Foreign Affairs and the Ministry of Commerce Respond to this respectively——

On September 1, Foreign Ministry spokesperson Wang Wenbin responded at a regular press conference that the US approach is typical of technological hegemony. The US has repeatedly generalized the concept of national security, abused national power, and attempted to use its own technological advantages to contain and suppress The development of emerging markets and developing countries violates the rules of the market economy and undermines the international economic and trade order. China firmly opposes this.

On September 1, the Ministry of Commerce responded at a regular press conference to the United States’ restriction on the export of two types of chips. China took note of the relevant situation. For some time, the United States has been abusing export control measures and restricting the export of semiconductor-related items to China. China is firmly opposed to this. The relevant practices of the United States deviate from the principle of fair competition and violate international economic and trade rules. They not only harm the legitimate rights and interests of Chinese companies, but will also seriously affect the interests of American companies, hinder international scientific and technological exchanges and economic and trade cooperation, and have a negative impact on the stability of global industrial and supply chains and the recovery of the world economy. impact. The United States should immediately stop its wrong practices, treat companies from all countries, including Chinese companies, fairly, and do more that is conducive to the stability of the world economy.

On August 26, 2022, the U.S. government or USG notified NVIDIA Corporation or the company that the USG has introduced a new restriction on the company's A100 and upcoming H100 chips. In the future, the above-mentioned chips from China (including Hong Kong) and Russia A new licensing requirement will be implemented for exports, effective immediately. DGX or any other system containing A100 or H100 integrated circuits and A100X is also included in the new licensing requirements. Licensing requirements also include any future NVIDIA integrated circuits with peak performance and chip-to-chip I/O performance equal to or greater than roughly equivalent to the A100, as well as any systems that include these circuits. A license is required to export technology to support or develop covered products. The USG said the new licensing requirements will address the risk that covered products may be used or transferred to "military end uses" or "military end users" in China and Russia. It should be emphasized that the company does not sell products to Russian customers.

The new licensing requirements may impact the Company's H100 development progress or ability to support existing A100 customers, and may require the Company to move certain operations outside of China. The company is working with USG and is seeking exemptions for the company's internal development and support activities.

Additionally, the Company is engaging with customers in China and seeking to meet their planned or future purchases of the Company's data center products that are not subject to the new licensing requirements. If a customer requires a product covered by the new licensing requirements, the Company may seek licenses for the customer, but there can be no assurance that USG will grant any exemption or license to any customer or that USG will do so in a timely manner.

The fiscal third quarter outlook provided by the company on August 24, 2022 included approximately $400 million in potential sales to China if customers did not want to purchase the company's alternative products or if USG promptly grants or denies licenses to key customers.

On August 26, 2022, the US government, or USG, informed NVIDIA Corporation, or the Company, that the USG has imposed a new license requirement, effective immediately, for any future export to China (including Hong Kong) and Russia of the Company's A100 and forthcoming H100 integrated circuits. DGX or any other systems which incorporate A100 or H100 integrated circuits and the A100X are also covered by the new license requirement. The license requirement also includes any future NVIDIA integrated circuit achieving both peak performance and chip-to- chip I/O performance equal to or greater than thresholds that are roughly equivalent to the A100, as well as any system that includes those circuits. A license is required to export technology to support or develop covered products. The USG indicated that the new license The requirement will address the risk that the covered products may be used in, or diverted to, a 'military end use' or 'military end user' in China and Russia. The Company does not sell products to customers in Russia.

The new license requirement may impact the Company's ability to complete its development of H100 in a timely manner or support existing customers of A100 and may require the Company to transition certain operations out of China. The Company is engaged with the USG and is seeking exemptions for the Company's internal development and support activities.

In addition, the Company is engaging with customers in China and is seeking to satisfy their planned or future purchases of the Company's Data Center products with products not subject to the new license requirement. To the extent that a customer requires products covered by the new license The Company may seek a license requirement for the customer but has no assurance that the USG will grant any exemptions or licenses for any customer, or that the USG will act on them in a timely manner.

The Company's outlook for its third fiscal quarter provided on August 24, 2022 included approximately $400 million in potential sales to China which may be subject to the new license requirement if customers do not want to purchase the Company's alternative product offerings or if the USG does not grant licenses in a timely manner or deny licenses to significant customers.