Nvidia shares fall after China AI chip is delayed

What just happened? More bad news for China’s sanctions-hit artificial intelligence industry. Nvidia has reportedly told customers in the country that its new AI chip designed specifically to comply with the latest US export rules is being delayed until the first quarter of next year. Nvidia’s share price fell around 4% on the back of the claims, though it has recovered slightly since then.

Citing two sources familiar with the matter, Reuters writes that the delayed chip is the H20, the most powerful of three AI-focused products Nvidia has developed to comply with the new US restrictions announced in October.

The latest rule updates extended the US government’s export ban to include the made-for-China A800 and H800, which are reduced versions of the A100, A100X, and H100 chips that were already prohibited from export to the Asian nation. Even the RTX 4090 isn’t allowed, which led to companies stocking up on the gaming GPU ahead of time and repurposing them as AI accelerators.

The launch of the new China-specific AI product, designed to comply with US regulations, was initially anticipated for November 16, but it has now been postponed to February or March next year. Sources say the reason for the delay is due to issues server manufacturers were having in integrating the chip.

As for the two other, less-powerful chips, sources say the L20 is not facing any delays and will launch according to schedule – November of December. It’s unclear if the final chip, the L2, will also be delayed or stick with its original release date of December or January.

A delay of a few months might not seem like a big deal for a company that dominates the AI market, but Nvidia is facing competition in China from local firms such as Huawei, which has sold a sizeable number of AI chips to Chinese internet giant Baidu.

Nvidia announced this week that its revenue had tripled compared to the previous year, with net income up 1,259% year-over-year, elevating CEO Jensen Huang to one of the thirty wealthiest people in the world. However, with around 25% of Team Green’s data center revenue coming from China, there was a warning that sales to the country would decline significantly during the next quarter.

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