The bigger trigger for the surge in the stock price was the fact that its guidance for the second quarter revenue met expectations despite the potential hit anticipated from export curbs to China.
For the quarter that ended, Nvidia reported sales of $44.06 billion, higher than the estimates of $43.31 billion, while its Earnings Per Share (EPS) at $0.96, also surpassed expectations of $0.93.
Nvidia has guided for $45 billion in sales for ongoing quarter that will end in July. This is after accounting for an $8 billion hit due to the export curbs on its H-20 chips to China. An average of analysts estimates had pegged the current quarter sales to be $45.9 billion.
Nvidia had to take a $4.5 billion inventory write-down in the quarter gone by due to the export curbs on data center processors to Chinese customers. CEO Jensen Huang said that the move has effectively shut Nvidia out of the market.
The company’s data center unit, which has now become larger than all of its rivals put together reported sales of $39.1 billion during the quarter, in-line with the $39.2 billion expectation. Gaming business sales were also higher than expected.
Nvidia’s management also spoke about the increased regulatory scrutiny in China.
“Regulators in China are investigating whether complying with applicable US export controls discriminates unfairly against customers in the China market,” it said. “If regulators conclude that we have failed to fulfill such commitments or we have violated any applicable law in China, we could be subject to financial penalties, restrictions on our ability to conduct our business.”
CEO Huang believes that the China AI accelerator market will grow to nearly $50 billion and the ongoing export restrictions will benefit its competitors and have a material adverse impact on the business going forward.
Shares of Nvidia ended 0.5% lower in regular trading on Wednesday, but have surged 5% so far in extended trade.
