Last Thursday, Nvidia (NASDAQ: NVDA) stock surged 16.4% after the AI chip leader delivered a strong quarterly report. The growth in the fourth quarter of fiscal 2024 (ended Jan. 28) was fueled by high demand across industries and regions for Nvidia’s data center platform chips and related products that support AI capabilities.
In fiscal Q4, Nvidia’s revenue surged 265% year over year to $22.1 billion, surpassing expectations. Adjusted EPS also saw a significant increase of 486% to $5.16, exceeding analyst estimates. The company’s guidance indicates continued strong growth, with Q1 fiscal 2025 revenue and adjusted EPS expected to increase by 234% and 396%, respectively.
During the earnings call, Nvidia management addressed the impact of sales to China from its data center platform following new regulations.
Nvidia developed new regulation-compliant solutions for the China market
In October 2023, the U.S. government issued regulations regarding the export of AI-related products to China and select countries. Nvidia’s CFO, Colette Kress, mentioned that sales to China declined significantly due to these regulations. However, the company began shipping alternative products to the Chinese market that do not require export licenses. China historically represented a substantial portion of Nvidia’s data center revenue, but in Q4, it accounted for a mid-single-digit percentage.
While Nvidia may face challenges in the China market due to regulatory constraints, the company’s financials could benefit from sales of alternative products tailored for that region.
Implications for Nvidia’s financial performance
Over the short to intermediate term, Nvidia’s data center platform can still achieve impressive growth without heavy reliance on the China market. The company’s dominance in the AI space positions it well to succeed in other regions. The introduction of new alternative products for China could potentially boost Nvidia’s financial results if they gain traction in the market.
Currently, Nvidia is in the process of sampling the alternative data center products for China. While sales to China are expected to remain in the single-digit percentage range for Q1 fiscal 2025, the company aims to navigate within the regulatory framework to succeed in that market.
While China may not represent the same percentage of Nvidia’s data center sales as in the past, the company’s strong position in the AI sector suggests potential success with its new alternative products in the Chinese market.
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BA McKenna holds positions in Nvidia. The Motley Fool holds positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
Nvidia Has Developed Alternative Data Center Products for the China Market That Don’t Require a License to Export was originally published by The Motley Fool
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