Nvidia stock and AMD stock fell Friday in the wake of the U.S. government imposing restrictions on exports to China and Russia involving those companies' high-end processors for data centers and artificial intelligence.
The restrictions threaten about 7% of Nvidia's sales but a much smaller share of AMD's sales, analysts say.
Still, news of the restrictions took a bite out of both stocks this week. Nvidia stock fell nearly 8% Thursday while AMD retreated 3%. On Friday, Nvidia shares dropped 2.1% 136.47 while AMD slid 2.5% to 80.24.
The news was another negative for Nvidia and Advanced Micro Devices, which both delivered disappointing quarterly reports in August.
Nvidia disclosed the new export restrictions late Wednesday in a filing with the Securities and Exchange Commission. It said the U.S. imposed a new license requirement on exports of its A100 graphics processing unit, or GPU. It also affects forthcoming H100 chips to China, including Hong Kong, and Russia. The government worries about use of AI chips for military applications in those countries.
Nvidia said it currently doesn't sell those chips in Russia. But the restrictions will impact about $400 million in potential sales to China in the company's fiscal third quarter. Nvidia will seek licenses for those sales or try to convince data center customers there to purchase less capable processors.
Nvidia Stock, AMD Stock: Losing Sales
Wells Fargo analyst Aaron Rakers said the possibility of Nvidia losing $400 million in sales this quarter from the restrictions is a "worse case" scenario.
"Nvidia could mitigate some of the export restrictions impact by selling products with performance below the A100 performance thresholds," Rakers said in a note to clients. It also might be successful in getting licenses for sales to certain data center customers, he said.
The export restrictions likely will be "immaterial" to AMD, he said. The restrictions would cover AMD's Instinct MI250X and forthcoming MI300 GPUs.
Rakers rates Nvidia stock and AMD stock as overweight, or buy.
The trade restrictions will add to investor angst about chip demand and growth prospects, Deutsche Bank analyst Ross Seymore said in a note to clients. He rates Nvidia stock and AMD stock as hold, or neutral.
Glass Half Full Or Half Empty?
Meanwhile, Evercore ISI analyst C.J. Muse thinks the impact of the new restrictions is unclear.
"As for glass half full, this might be just an attempt by the U.S. government to ensure products are going only to approved customers (like potentially Alibaba, Tencent, etc. and not those affiliated with the Chinese military) with impact to revenues simply a matter of obtaining licenses in a timely manner," Muse said in his note to clients.
He added, "But glass half empty, this could have a meaningful impact on high-performance compute demand going forward for Nvidia if licenses are not granted and/or Nvidia is required to ship lower-performance solutions to certain customers."
Also, Nvidia might have to move certain operations out of China to comply with the new rules, Muse said. He rates Nvidia stock as outperform.
The restrictions are seen impacting 7% of Nvidia's sales in the current quarter. But they could impact 10% of the company's revenue longer term, Truist Securities analyst William Stein said in a note. That's due to the potential growth in the data center market in China, he said. Stein rates Nvidia stock as buy.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
