During the third quarter, NVIDIA reported poor sales in China, with geopolitical tensions impacting its demand. According to NVIDIA's previous financial year earnings report, 13% of total revenue was attributed to China.
However, in its latest earnings results, the firm earned $2.8 billion from China, or 5% of the total monthly sales. This was lower than the analysts' estimates of $8.4 billion.
The firm made sales of $50 million in H2O chips, which are customized models of its Hopper GPUs, tailored for the Chinese market. CFO Colette Kress cited the impact of differences from previous earnings on the US-China trade wars and the rise of local Chinese companies.
Despite the poor sales in China, the revenue from the US market increased to $39.2 billion, while Taiwan contributed $13.8 billion.
In April, the US imposed an official ban on trade on NVIDIA’s H20 chips to China, where the company lost $2.5 billion in revenue during the first quarter. When negotiations were finalized, the company received export licenses in August, but on the condition that NVIDIA needed to pay the U.S. government 15% of its revenue from specific AI chip sales to China.
However, Chinese regulators banned Chinese technology firms from acquiring H2O chips, which curtailed their ability to increase their sales in the market.
According to NVIDIA’s CFO, the company’s sales could improve depending on the interaction between the US and Chinese governments. She also stressed the need for competition from America in AI computing despite regulatory hurdles.
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NVIDIA CEO Jensen Huang has stated that the China opportunity represents a significant AI market, estimated to be around $50 billion. The company, however, is expanding into other areas. NVIDIA AI servers and technology are in demand in markets like the UAE, Saudi Arabia, and South Korea.
Notably, the US Department of Commerce approved up to a maximum of 35,000 server sales of advanced NVIDIA GB300 AI servers to companies in the UAE.
There has been an increase in competition in the development of AI chips by Chinese firms such as Huawei and Alibaba. Meanwhile, the policies of the US-China trade still pose uncertainty for further sales. Despite these difficulties, NVIDIA's global strategy is focused on developing other markets, even though AI leadership remains its priority.
The company also seeks to keep up advocacy with the government. This enables the company to provide wider access to AI products globally, which could help it remain a stakeholder in the expanding global AI computing industry.