Nvidia Set to Launch New Gaming Chips for China After US Restrictions

Nvidia (NYSE: NVDA) is set to launch a new gaming chip in China to comply with the US export restrictions which were further strengthened this year.

Reuters reported that on its China website, the company has listed the Nvidia RTX 4090D which has 11% fewer processing cores compared to variants that it sells outside the country but added that it offers a “quantum leap in performance, efficiency and artificial intelligence-driven graphics.”

Nvidia set to launch new gaming chip for China

A Nvidia spokesperson further told Reuters that “The GeForce RTX 4090 D has been designed to fully comply with U.S. government export controls. While developing this product, we extensively engaged with the U.S. government.”

Notably, last year the US imposed restrictions on chip exports to the US and further tightened them this year to prevent the exports of chips that have processing powers just under the banned chips.

However, earlier this month, US Commerce Secretary Gina Raimondo said that NVDA “can, will and should sell AI chips to China because most AI chips will be for commercial applications.”

She added, “What we cannot allow them to ship is the most sophisticated, highest-processing power AI chips, which would enable China to train their frontier models.”

Nvidia warned that export restrictions would hurt its revenues

Notably, Raimondo’s comments came barely a month after Nvidia warned in its fiscal Q3 earnings call that US chip export restrictions would hurt its revenues.

NVDA CEO Colette Kress said, “We expect that our sales to these destinations will decline significantly in the fourth quarter, though we believe will be more than offset by strong growth in other regions.”

She also warned, “The export controls will have a negative effect on our China business, and we do not have good visibility into the magnitude of that impact even over the long term.”

NVDA stock has tripled in 2023

Meanwhile, Nvidia stock has more than tripled in 2023 and is the top S&P 500 gainer. The demand for Nvidia’s high-end chips has soared in 2023 amid the artificial intelligence (AI) pivot. The company’s chips are a key building block for generative AI models and the euphoria has helped drive Nvidia’s earnings as well as stock price higher

While Nvidia shares have suffered pullbacks amid the broader market correction and apprehensions over the US banning exports of several high-end chips to China– including some produced by Nvidia – the stock is now again approaching its all-time highs.

2023 has been a pivotal year for Nvidia as it became a trillion-dollar enterprise in the year joining the ranks of Apple, Amazon, Alphabet, and Microsoft.

While many market participants believe that the optimism toward the AI pivot is real, some others see a bubble.

Even Warren Buffett and his (recently deceased) deputy Charlie Munger have also expressed concern over AI and the former compared it to an “atom bomb” earlier this year. Notably, Nvidia released its fiscal Q1 earnings a few weeks after the meeting where it not only shattered earnings estimates but also provided guidance well ahead of analyst estimates.

It has since posted better-than-expected revenues and profits in the next two quarters as well while its guidance has been higher than even the most optimistic estimates.

Goldman Sachs does not believe AI is a bubble

Deepwater’s Gene Munster is among those who believe that we are not in an AI bubble – a view also echoed by Goldman Sachs. Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research said in a note that AI stocks are in a bubble despite the rally.

Wall Street is bullish on Nvidia stock

Meanwhile, despite the stellar rally in 2023, analysts expect Nvidia shares to continue their good run in 2024. Baird analyst Tristan Gerra has a price target of $750 on NVDA believes that the AI wave “overall remains at its infancy” and added, “Nvidia is at the center of the secular demand for AI ahead.”

Gerra also noted that the “AI server demand gap is expected to persist at least through mid C2024, with demand exceeding supply by nearly 20% in the current quarter.”

Veteran tech analyst Paul Meeks is also bullish on Nvidia stock and speaking with Yahoo Finance he said, “I think there is a chance for it [to become the world’s most valuable company] to happen.”

He added, “[If] you think about it, it’s going to have to increase its market cap at least 100% from here. I think it could happen, but I would not be bold enough to make that claim yet.” Meeks also termed Nvidia his “best tech idea going into 2024.”

Analysts on NVDA’s valuation

Meanwhile, even as Nvidia shares have surged, some analysts believe that the stock is still quite undervalued as its price-to-earnings-to-growth multiple is below 1, which is a rarity among quality tech names.

According to Moor Insights & Strategy CEO Patrick Moorhead, “In 2024 for Nvidia, there is no doubt a lot more room to grow from a revenue and a profit dollar standpoint.”

He added, “We are also going to see some big action on the inference side as we saw in machine learning about four or five years ago when the growth went from training to inference. No doubt there is more room here for Nvidia.”