Investing.com -- Shares in Nvidia (NASDAQ:NVDA) were volatile in premarket trading after the world's largest semiconductor manufacturer warned of a downturn in sales at its China business in the wake of expanded U.S. export controls to the country, but said the impact would be offset by solid growth in other regions.
Nvidia flagged that sales in its key Chinese market would "decline significantly" in its current quarter due to last month's move by the Biden administration to extend the scope of its sanctions on exports of cutting-edge AI chips to the country.
Approximately 20%-25% of Nvidia's key data center business is derived from its sales in China, the company said, meaning that it could be vulnerable to Washington's ongoing drive to limit Beijing's access to AI materials.
However, Chief Financial Officer Colette Kress said in a statement that this drop "will be more than offset by strong growth in other regions." For the fiscal fourth quarter, the company forecast revenue of $20.00 billion, give or take 2%, topping analyst estimates from Investing.com for $17.91B.
Reports have said that Nvidia is already working to come up with new processors specifically for the Chinese market in a bid to skirt U.S. performance rules. Although some observers have raised concerns that the re-designed chips could still be banned by U.S. officials, analysts at AllianceBernstein (NYSE:AB) suggested that these products "may help to backfill some of that missing demand over time."
"We are working with some customers in China [...] to pursue licenses from the U.S. government. It is too early to know whether these will be granted for any significant amount of revenue," Kress said in a call with analysts.
In the third quarter, Nvidia's data center division, which includes chips that help run AI applications, raked in revenue of $14.5 billion -- a year-on-year rise of 279%. Kress noted the result was not "meaningful[ly]" impacted by the U.S. restrictions, which were announced near the end of the three-month reporting period that finished on Oct. 29.
Total revenue reached a quarterly high of $18.1B, far outpacing estimates of $16.2B, as Nvidia continued to reap the benefits from a recent boom in demand for AI-powered products. Adjusted per-share income of $4.02 also beat projections of $3.36.
Yasin Ebrahim contributed to this report.