Nvidia Stock Rises. It Still Has AI Chip Problems in China but CEO Says Demand Is Strong

Nvidia CEO Jensen Huang has built the company into the leading provider of artificial-intelligence chips. (Photo by PATRICK T. FALLON/AFP via Getty Images)

Nvidia stock was rising early Friday, along with most of the market.

While the chip maker is facing another obstacle to resuming sales of its artificial-intelligence processors in China, investors may be taking solace in the company CEO’s latest positive update on Nvidia’s next chips.

The shares were up 1.3% at $177.26 in early trading after rising 0.2% on Thursday. Nvidia stock is on track for its first two-week losing streak since April—it’s down 3.0% this week through to Thursday’s close and lost 1.2% last week.

Nvidia has told component suppliers to suspend work related to its H20 chip, according to multiple reports. The H20 is an AI chip specifically designed for the Chinese market and compliant with U.S. export restrictions.

Nvidia was recently asked by a Chinese cybersecurity regulator to explain “backdoor security risks” associated with its chips and authorities in Beijing have discouraged domestic companies from using the hardware.

Nvidia CEO Jensen Huang addressed the issue during a Q&A session with reporters in Friday. He was in Taiwan visiting Nvidia’s supplier Taiwan Semiconductor Manufacturing. “Recently China asked some questions about some security backdoors in our chips. We have made very clear and put to rest, H20 has no security back doors,” he said. “Hopefully, the response that we’ve given to the Chinese government will be sufficient. We are in discussions with them .. Hopefully this will be resolved.”

Huang also said he was surprised by the inquiry from China’s regulator since the government had asked Nvidia to secure H20 export licenses from the U.S. government, adding demand for the H20 is “quite great.”

“We constantly manage our supply chain to address market conditions,” an Nvidia spokesperson said in an emailed statement. “Cybersecurity is critically important to us. Nvidia does not have ‘backdoors’ in our chips that would give anyone a remote way to access or control them. The market can use the H20 with confidence.”

Huang was also asked about a new faster chip for China, the successor to the H20. He said talks are under way with the U.S. government. “That’s not our decision to make. We’re in dialogue with them, but it’s too soon to know,” he said.

Huang also said Nvidia had given TSMC the chip designs for six brand new chips including a CPU, the next generation Rubin GPU, and other networking semiconductors. The executive said he was in Taiwan to thank TSMC for their efforts.

Some Wall Street analysts were not sure that Nvidia’s financial forecasts would include sales in China, which require license approvals for H20 chips to be sold and for the company to give the U.S. government 15% of the revenue generated, when it reports earnings on Aug. 27.

Among other chip makers, Advanced Micro Devices was up 1.7% and Broadcom was rising 2.7% in early trading. AMD also has chips designed specifically for the Chinese market.

Write to Adam Clark at adam.clark@barrons.com