EXCLUSIVE: Why Nvidia could see "$2 billion hit in 2023" by US crackdown on China chip exports

Nvidia Corporation NVDA, a graphics chipmaker and investor favorite, reported in a filing with the Securities and Exchange Commission on Wednesday that the Biden administration has implemented restrictions that prevent the chip giant to sell its A100 and H100 chips to Russia and China, effective immediately.

Nvidia's '2 billion hit'? Restrictions on Nvidia's H100 and A100 chips - which are used to speed up machine learning operations - mean an escalating US crackdown on China's technological might. Related: Nvidia, AMD shares fall as US imposes export restrictions on top AI chips to China: What's the matter? in danger here?

In the filing, Nividia said it expects to lose $400 million, or 10.6% of its data center business and 6.8% of revenue in the third quarter, due to the new restrictions imposed.

"My estimate is that this could potentially mean a $2 billion impact for 2023," Stephanie Link, CIO and portfolio manager at Hightower Advisors, told Benzinga on Thursday.

“Markets hate uncertainty and this one is important for a highly rated stock: there are currently 37 analyst buys on the sell side (12 holds, 1 sell). Plus, the stock isn't cheap at 38 times forward estimates - and those estimates are falling."

Hayes sees a 'workaround' for Nvidia: KeyBanc Capital Markets analysts released a note on Wednesday following Nvidia's announcement that offers a silver lining.

China-based technology company Huawei faced similar restrictions several years ago and was able to make up for its losses with products not limited by the requirement, according to KeyBanc.

Thomas Hayes, chairman and managing member of Great Hill Capital, said this could also be the case with Nvidia.

"It is expected that there will be some type of workaround for NVDA as the chips in question are not readily transposable to a military application," said Hayes in Benzinga on Thursday.

"But for now, shoot first, ask questions later, because people are throwing away their stock."

Nvidia Investors Withdrawal: Nvidia stock selling was deep on Thursday, dropping 11% by midday as investors weigh the unforeseen challenges that restrictions on the export will create for the company.

"There is real uncertainty about the timing of licensing as well as the revenue impact," Link said.

“Semis is in a tough spot with double and triple orders (due to supply constraints) and some end market weakness (notably gaming and PC). This news will unfortunately not help the negative sentiment. Tread carefully!" said the IOC.

In a Thursday update, Nvidia said until March 1, 2023 that US authorities had granted it permission to perform the exports necessary to support A100 customers in the United States

In addition, Nvidia said that until September 1, 2023, the government has granted permission to use its Hong Kong facilities to fulfill chip orders.

The Final Word: Jay Goldberg, CEO of D2D Advisory, Says Ban Highlights Growing Tensions Between the US and China Over Access to Cutting-Edge Technology fleas.

"We will prevent certain American companies from supplying a certain company, as was the case with Huawei, to ban the sale of certain American products to China, period," Goldberg said .

Experts say the ban will affect China's biggest tech companies, including Alibaba Group Holding Ltd BABA and Baidu Inc BIDU.

The Nvidia H100 GPU. Courtesy picture.

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