Nvidia (NVDA) is set to release a modified gaming chip that complies with U.S. export rules targeted at China, helping the chipmaker steer around a potential sales setback and round out a positive 2023. The company, which holds more than 90% market share in China's AI chip market, is set to close the year with a market cap of above $1 trillion.

Yahoo Finance’s Brian Sozzi and Brad Smith weigh in on Nvidia’s business model and how the company has managed to remain ahead of the curve—and most likely will, well into 2024.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

BRIAN SOZZI: All right. NVIDIA is launching a modified version of its advanced gaming chip that complies with US export controls targeting China. This is the first China-focused chip for the company since the Biden administration put those export rules into effect back in October. NVIDIA currently holds more than 90% market share of China's $7 billion AI chip market and is poised to close the year above $1 trillion market cap for the first time ever.

And, Brad, this issue with China was a key risk we just highlighted when we did our special NVIDIA coverage, what, 48 hours ago or whatever it was. You can go see that content out there, and there it is. That was our original graphic, and they just put a line right through it. So that is the ugly being removed off that chart.

Now, that doesn't necessarily mean NVIDIA's upcoming earnings results are going to show significant acceleration in China quarter over quarter because of this issue. It will probably take a couple of quarters before those China results stabilize. But again, good to see NVIDIA-- good for NVIDIA to be addressing this. And I think another issue or another thing why this will feed into the NVIDIA bull narrative.

BRAD SMITH: Yeah, this is absolutely massive if you think about the international ambitions and really retaining some of those customers internationally. That is key for NVIDIA and for investors to see in terms of the margin growth expectations at this point.

The second we see any type of deceleration in that margin growth as tied to the AI part of its chip business here. And for everything that we've heard over the course of the year for GDX Cloud and what that's going to mean for NVIDIA in the future, it could still signal to investors that deceleration if they were to see that in the margin growth side, that, all right, now we must take some profits. Now we must reassess what an actual multiple looks like going forward from here.