AI Chip from Nvidia Experiences Slow Sales and Intense Rivalry in the Chinese Market
Nvidia Faces Intense Competition in China's AI Market
Nvidia, a leading player in the AI industry, is grappling with intense competition in the Chinese market. The US sanctions on AI chip exports and local competition have created a challenging environment for the tech giant.
The competition between Nvidia and Huawei could significantly impact Nvidia's long-term position in the AI industry. Forecasts suggest that the Chinese market will account for over 30% of the global AI industry by 2035, making it a crucial market for any AI chip manufacturer.
To navigate these challenges, Nvidia introduced three chips tailored for China late last year, including the H20 artificial intelligence chip. This chip, developed specifically for the Chinese market, is priced below Huawei's Ascend 910B due to an abundant supply. The H20 chip is being sold at over a 10% discount to Huawei's Ascend 910B.
The market for Nvidia's H20 chips, however, seems to be flooded, signaling weak demand. In contrast, Huawei expects shipments of Ascend 910B chips to increase significantly more than Nvidia H20 chips from the third quarter of 2023 onwards.
Server distributors in China are selling the H20 for approximately RMB 1.1-1.3 million (USD 151,890-179,500) per eight-card server, while Huawei's 910B starts at a similar price range. Interestingly, according to Reuters, five state or state-affiliated buyers have shown interest in Nvidia's H20 chips, compared to over a dozen for Huawei's 910B.
Nvidia's CFO, Colette Kress, predicted that the Chinese market will remain competitive in the future. Jensen Huang, co-founder, president, and CEO of Nvidia, stated that the company's business in China is currently lower than past levels, attributing this to sanctions.
Despite these challenges, Nvidia's shares have recently extended a stunning rally following a robust revenue forecast. The company's skirmish in China could define its strength in the AI industry in the coming years. The Chinese market, which contributed 17% to Nvidia's revenue for fiscal 2024, is of great significance to Nvidia and AI chip manufacturers.
As the race heats up between Nvidia and Huawei in the Chinese AI market, the future of both companies in the global AI industry hangs in the balance. The competitive pressure in China adds a cautionary note for US investors, highlighting the importance of navigating the complexities of the Chinese market effectively.
