Published - November 8, 2022 @ 3:57 PM (EET)

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After new rules threatened to cost Nvidia Corp. (NASDAQ:NVDA) hundreds of millions of lost revenue, the most valuable chipmaker in the US has begun offering an alternative processor for customers in China to soften the blow from recently imposed US export restrictions.

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Branded the A800 GPU, Nvidia said in a statement Monday the new graphics-processing chip went into production in the third quarter and will serve as an alternative to the A100 model.

The company said the A800 chip meets the US government's test for reduced export control, with limitations that would hamper its use in AI models or supercomputers.

WHY IT MATTERS

Earlier this year, Nvidia shocked investors when it said it was banned from selling its A100 and upcoming H100 products to Chinese customers without special government approval.

The change could put around $400 million in sales, or roughly 11% of expected data center revenues, at risk if its clients opt not to purchase alternative products.  According to Nvidia, about a quarter of the company's $26.9 billion in revenue in its most recent fiscal year came from China and Hong Kong.

Concerned that the Chinese military might use the processors, the Biden administration expanded the restrictions last month, escalating tension between the two countries and adding new hurdles for US chipmakers already facing a demand slowdown.

Alongside other performance thresholds, the restrictions limit the interconnect bandwidth of chips that could be exported to China to less than 600 gigabytes per second.  

Where the A100 has the equivalent bandwidth, the A800 can send only 400 gigabytes and "cannot be programmed to exceed it," management said.

MARKET SENTIMENT

Trimming Nvidia's six-month decline to around 13.4%, Nvidia shares were marked 2.44% higher in pre-market trading, indicating an opening bell price of $146.50 per share.

Based on 32 analysts' ratings tracked by TipRanks in the last three months, the stock currently has a Moderate Buy consensus.  The average price target of $195.52 implies an upside potential of 36.72%.