Chip maker Nvidia expects a decline in its fourth- quarter sales in China, which is a key revenue generator, amid the new US rules, but forecast overall revenue above Wall Street targets as supply- chain issues ease.

The chip maker’s graphics processing units( GPUs) takes a large chunk in the market for AI, and is predicted to be affected by the US export controls that decides what the company can sell to China.

Sales of the affected chips made up nearly a quarter of Nvidia's datacenter sales in the past few quarters.

"Export controls will have a negative effect on our China business, and we do not have good visibility into the magnitude of that impact even over the long term," Chief Financial Officer Colette Kress said.

Additionally, Kress revealed that the chip giant is working on new compliant chips for China except those will not materially contribute to fourth- quarter revenue.

As the company’s stocks rose more than 240 this year, it slipped1.5 in volatile after-hours trading.

In terms of the conflict in Gaza, it also faces risks in Israel regarding its networking business which is headquartered there. Sales from that unit, whose gear is used in AI supercomputers, rose 155 from a year ago. Kress said the networking business exceeds a$ 10 billion annualized run rate.

Moreover, the chipmaker’s workforce in the region have been called up to the army frontline for military duty. It’s feared that if the war continues, the workforce’s absence could hurt the company’s future operations.

For the fourth quarter, the company’s forecast adjusted gross margins of 75.5 percent, above analyst estimates of 72.64 percent, according to LSEG data. But the company's China troubles could make those margins hard to maintain.

However, Nvidia is positive on its supply for its AI chips to improve as it prepays to ensure it gets factory priority. It outsources manufacturing to contract chipmakers like TSMC .