Nvidia Faces Revenue Threat from New U.S. AI Chip Export Curbs, Analysts Say
Nvidia is facing a significant revenue threat following the latest U.S. export restrictions on artificial intelligence chips, aimed at restricting the global distribution of these sought-after processors, as highlighted by analysts and investors on Monday.

The regulations, described as some of the toughest from the Biden administration, restrict AI chip exports to most countries, with exceptions for a select group of close U.S. allies. Additionally, exports to certain countries, including China, remain blocked as part of efforts to close regulatory loopholes and prevent Beijing from acquiring advanced chips that could enhance its military capabilities.
The surge in demand for AI chips has propelled Nvidia into the league of the world's most valuable companies, boasting a market value exceeding $3 trillion. However, the new restrictions could complicate the company's ability to achieve the robust revenue growth that investors anticipate.
D.A. Davidson analyst Gil Luria expressed concerns, stating, "These rules will significantly limit (Nvidia's) market since as much as half its chips currently end up in countries that will be off-limits once the rules are applied." Company filings reveal that Nvidia derives approximately 56% of its revenue from customers outside the U.S., with China accounting for about 17% of sales. Consequently, shares of the Santa Clara-based company experienced a decline of around 2%.
Nvidia's Vice President of Government Affairs, Ned Finkle, warned that the export curb could impede innovation and economic growth globally and undermine America's leadership in the AI sector. Finkle argued that the rule would impose bureaucratic control over the design and marketing of America's leading semiconductors, computers, systems, and software on a global scale.
Criticism of the rules extended to the Semiconductor Industry Association, a lobbying group, which highlighted that the move could compel U.S. firms to relinquish market share to competitors. Investment analyst Dan Coatsworth from AJ Bell remarked, "By limiting access to large quantities of advanced processors, the U.S. is effectively showing the world who's the boss. However, in doing so, it also threatens to crimp the earnings potential for many American firms such as Nvidia."
Analysts have been revising earnings estimates for Nvidia, surpassing its remarkable share price growth. The forward price-to-earnings ratio currently stands at about 31, compared to previous highs of over 80 in June 2023.
Big Cloud Providers Likely Winners
Under the new regulations, major cloud providers like Microsoft, Google (owned by Alphabet), and Amazon.com can seek approval to bypass licensing requirements for AI chips, enabling them to establish data centers in countries affected by U.S. chip import restrictions. Consequently, these companies, already established as AI powerhouses, are expected to expand their market share, according to analysts.
CFRA Research analyst Angelo Zino noted, "We have long viewed these companies as the gatekeepers of AI, anyway, given their financial ability to continually invest in next-gen large language models and massive installed bases. The companies that have access to the most advanced chips (in this case, the big cloud providers) will have an advantage."
Despite the potential advantages for big cloud providers, uncertainties loom over the new rules as they are scheduled to come into effect 120 days from publication, allowing the incoming Trump administration time to provide input. While both administrations share similar views on China's competitive threat, some analysts believe that President-elect Donald Trump may be more inclined to negotiate deals with individual companies and countries.
Dan Coatsworth remarked, "He (Trump) might tinker with the list of allies on the exemption list, but overall, the move is in step with Trump’s way of thinking,"
Nvidia faces revenue threat due to U.S. export restrictions on AI chips
Regulations limit AI chip exports to most countries, excluding select U.S. allies
Major cloud providers like Microsoft, Google, and Amazon may benefit from the new rules
Source: REUTERS