Nvidia ships first H200 chips to China but expects no future sales

Nvidia ↗ 2.78% confirmed on Wednesday that it shipped a small number of H200 artificial intelligence processors to Chinese customers during its fiscal second quarter, marking the company's first re-entry into the China market after months of stalled negotiations. The sales, however, fell well short of the volume permitted under a U.S. government license, and the company took a $400 million inventory charge as a result.

A Modest Return

Sales of H200 chips to Chinese buyers accounted for less than 1% of Nvidia's $89 billion in data center revenue for the three months ended July 26, the company said in its earnings report. The disclosure marked a shift from the prior quarter, when Nvidia reported zero shipments of its Data Centre Hopper products to China.scmp+1

The U.S. Commerce Department had approved roughly 10 Chinese firms — including Alibaba ↗ 1.28%, Tencent, ByteDance, and JD.com ↗ 1.64% — to purchase H200 chips under a licensing framework granted in January, with each approved customer permitted to buy up to 75,000 chips. But deliveries stalled for months due to objections from Beijing authorities, who steered domestic firms away from following through on orders.bloomberg+2

A U.S. commerce department official said last month that shipments had begun but remained "very few".theglobeandmail

Inventory Hit and Uncertain Outlook

Nvidia said it took a $400 million charge over the past six months for excess H200 inventory tied to diminished demand from China. The company's third-quarter revenue forecast of $108 billion assumed no data center chip sales from China, underscoring continued uncertainty about the market.bloomberg+2

Broader Earnings Beat

The China complications did little to dent Nvidia's overall performance. Revenue more than doubled year-over-year to $96.2 billion, beating analyst estimates of roughly $92 billion, while adjusted earnings per share came in at $2.22 versus expectations of $2.10. The company forecast third-quarter revenue above Wall Street consensus.nvidianews.nvidia+2

Nvidia's shares slipped modestly in after-hours trading, as investors weighed the results against mounting competition from in-house chip efforts at major customers including Meta Platforms ↗ 0.84% and Alphabet ↗ 0.78%, as well as narrowing margins tied to its upcoming Rubin chip production ramp.theglobeandmail