White House Urges Rejecting Bill Curbing Nvidia Exports

Key Concepts

• Gain A.I. Act: Proposed legislation requiring U.S. chipmakers to prioritize sales of controlled export chips to U.S. companies before selling to China and other embargoed nations.
• Safe Act of 2025: Proposed legislation requiring the Commerce Department to deny all applications for sales of AI chips to China that exceed current U.S. allowance levels.
• Nvidia's Revenue Forecast: Nvidia's projected revenue for the upcoming quarter, which was significantly impacted by the exclusion of China sales.
• Blackwell and Rubin Architectures: Nvidia's advanced chip architectures, with Blackwell sales described as "off the charts" and the Rubin architecture ramp-up going "very well."
• Supply Chain Pressures: Increasing component prices in the supply chain, impacting chip manufacturers' margins.

Nvidia's Market Outlook and Government Engagement

Nvidia's forecast for the China market is currently zero. The company intends to continue engaging with both the U.S. and Chinese governments to advocate for the ability to compete in the open market. Until such a change occurs, the assumption for China market revenue will remain at zero.

White House Opposition to the Gain A.I. Act

Bloomberg has reported that White House officials are actively urging members of Congress to oppose the "Gain A.I. Act." This act is designed to mandate that U.S. chip companies offer their chips, which are subject to export controls to China and other nations under arms embargoes, to U.S. entities first. Essentially, the proposed legislation aims to prevent companies like AMD and Nvidia from selling their most advanced chips to China.

Implications of White House Stance for Nvidia

This development is seen as a positive for Nvidia, as it publicly lobbied against such legislation. Nvidia's primary argument against these restrictions is that limiting China's AI advancements will only incentivize them to become more self-sufficient and competitive internally.

Ongoing Legislative Efforts and the Safe Act of 2025

Despite the White House's stance on the Gain A.I. Act, the push to limit China's AI advancements is not over. Lawmakers have begun working on a separate measure, the "Safe Act of 2025." This proposed act would direct the Commerce Department to deny all applications for sales of AI chips to China that are more powerful than what the U.S. currently permits.

Nvidia's Financial Performance and Forecast

Nvidia's CEO, Jensen Huang, discussed the company's sales of the H20 chip and the necessity of completely removing China from their upcoming revenue forecasts. Despite the challenges in the China market, Nvidia managed to deliver strong results, lifting its sales forecast for the next quarter to approximately $65 billion in revenue. Sales for the Blackwell architecture are described as "off the charts," and the ramp-up of the Rubin architecture is progressing very well.

Supply Chain Pressures and Margin Concerns

A notable weak spot in Nvidia's performance was in its margins, which missed analyst expectations. Jensen Huang attributed this to pressures in the supply chain, specifically increasing component prices. For instance, Reuters reported that Samsung was considering raising key memory chip prices by as much as 60% in November. Major suppliers, many based in Asia, such as TSMC, Hon Hai, Samsung, and SK Hynix, along with others like Biden Advantage and Tokyo Electron, may be leveraging their pricing power due to these supply chain dynamics.

Conclusion

The current landscape for Nvidia's China market is characterized by zero revenue expectations, driven by ongoing geopolitical and legislative pressures. While the White House's opposition to the Gain A.I. Act offers a reprieve, the proposed Safe Act of 2025 indicates continued efforts to restrict China's access to advanced AI chips. Despite these external challenges, Nvidia has demonstrated resilience, exceeding expectations with its revenue forecast and strong performance in its latest chip architectures. However, increasing supply chain costs are impacting the company's margins, a factor that will likely continue to be a focus for investors and the company moving forward.