KEY POINTS

  • According to reports from Taiwan, Nvidia is looking to place rush orders for its A100 and H100 chips.
  • There is a one-year buffer period before export restrictions come into effect.
  • This quarter’s order rush may help to cushion the damage.

What’s going on with Nvidia stock

Nvidia stock climbed back yesterday, climbing 1.39% as of the market closing. The graphics chipmaker firm’s stock gained as much as 2% in early trading, despite the broader technology sector’s downturn.

Nvidia (NASDAQ:NVDA) had a rough month as several new problems cropped up. First, on its August earnings call, the company gave weaker-than-expected guidance, as demand for its graphics cards has dropped sharply due to declining interest in cryptocurrency mining and falling PC sales. Then, to make matters worse, the Biden administration recently imposed export restrictions on Nvidia’s high-end data center chips destined for China.

Nvidia attempted to rebound after a significant price drop. Still, rumors are circulating that the company may try to rush data center GPU chip orders to Chinese consumers before the ban takes effect.

Why we care

According to the Taiwanese business journal UDN, Nvidia has requested that Taiwan Semiconductor Manufacturing (NYSE:TSM) accelerate the production of A100 and H100 chips so it can sell them to Chinese customers before the ban takes effect.

There is some ambiguity about how much Nvidia can ship until the ban goes into effect. Additionally, it is unknown if they will sell directly to Chinese customers or other non-Chinese businesses with activities in China. The “buffer period” for the A100 could extend till March 2023. Furthermore, the H100 period could last until September 2023 for specific customers, as said in the report.

One year could actually assist Nvidia. It had previously predicted that the limitations might cost up to $400 million in current quarter revenue. In addition, the impending ban, which necessitates an export license to sell high-end GPUs to data center customers, may be prompting a near-term rush of orders from Chinese companies. Those companies would have otherwise delayed placing those orders due to the weak economy. If they materialize, these purchases might help soften what is otherwise a weak demand for Nvidia.

The $400 million figure Nvidia disclosed in its August 31 press release might not represent the full extent of the data center revenue damage because of both the buffer period and the rush of orders.

What now

Even though Nvidia isn’t technically failing, as it still trades at a high 35 times earnings, its stock has decreased 55% this year. Its technology lead in chips that enable artificial intelligence is undoubtedly a great company. However, despite this impressive feat, the company’s stock has been heavily discounted.

It’s debatable whether the company’s previous valuation was correct. But, for long-term investors, the recent difficulties for Nvidia might be an attractive investment alternative. That’s especially true if the current slowdown is only a few quarters long. Moreover, if export limitations aren’t as much of a hindrance as others anticipate.

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