Nvidia’s Asian suppliers dip as China fears sully strong earnings

Investing.com-- Shares of NVIDIA Corporation's (NASDAQ:NVDA) Asian suppliers fell on Wednesday, reversing some gains made over the past two sessions as a bleak forecast for Chinese revenue outweighed otherwise strong quarterly earnings from the world’s most valuable chipmaker.

Nvidia clocked adjusted earnings per share of $4.02 on revenue of $18.12 billion, handily beating Investing.com estimates for EPS of $3.36 and revenue of $16.18 billion, in the three months to Sept. 30.

The firm also forecast revenue of around $20 billion for the quarter to December, above estimates for a forecast of $17.91 billion.

But Nvidia flagged a significant decline in future revenue from China, citing the impact of U.S. restrictions on the export of artificial intelligence chips to the country. China accounts for around a quarter of Nvidia’s overall revenue, and was slapped with U.S. export restrictions earlier this year to cut the country from the fast-growing AI industry. 

While the Nvidia said that increased revenue from other regions will offset headwinds from China, the warning still raised concerns over a potential slowdown in future revenue, despite increased interest in AI development. 

Nvidia’s shares fell from record highs in aftermarket trade, prompting losses in most of the company’s Asian suppliers. Japan’s Advantest Corp. (TYO:6857), which supplies semiconductor testing equipment to Nvidia, sank 2.6% on Wednesday, while Tokyo Electron Ltd. (TYO:8035)- which makes chipmaking equipment- fell 0.6%. 

TSMC (TW:2330) (NYSE:TSM)- the world’s biggest contract chipmaker and a key Nvidia supplier- fell 1.5% in Taiwan trade, while memory chip suppliers SK Hynix Inc (KS:000660) and Samsung Electronics Co Ltd (KS:005930) fell 1.6% and 1.1%, respectively. 

SoftBank Group Corp. (TYO:9984), which is exposed to Nvidia through its Arm (NASDAQ:ARM) unit, fell 0.1%. Arm was flat in overnight trade. 

In contrast to its peers, Nvidia has largely ducked a broader downturn in the chipmaking industry, as rising interest rates and waning demand for consumer electronics battered chip demand over the past year.

The firm has cited AI as the key driver of its earnings, given that it is among the few chipmakers that makes products specifically geared towards AI development. Nvidia had recently launched a new flagship AI chip- the H200.

AI hype drove Nvidia to lofty valuations this year, also boosting the shares of its major Asian suppliers.

But other major chipmakers, particularly TSMC, have not shared Nvidia’s enthusiasm over AI. TSMC recently warned that while AI was expected to help spur some demand, the broader chipmaking industry remained under pressure. TSMC reported a series of sharp declines in its earnings this year.

Major Chinese tech firms also recently warned of the impact of U.S. export curbs. Alibaba Group (HK:9988) (NYSE:BABA) canceled a planned spin-off of its cloud division- which is at the heart of its AI development efforts, while Tencent Holdings Ltd (HK:0700) said that while it had stockpiled Nvidia chips over the past quarter, it was now seeking new sources for its AI chips.