“We (the United States) have effectively handed over the Chinese AI market to Huawei. Nvidia can no longer compete with Huawei.”
As news broke that Huawei is set to begin mass shipping next-generation AI chips as early as next month, Nvidia investors became unsettled. Stacey Rasgon, a well-known semiconductor analyst at Bernstein Research, remarked that as the U.S. government's semiconductor export control measures against China have effectively blocked Nvidia's high-performance chips from being exported to China, Huawei has quickly taken advantage of this gap to dominate the Chinese AI chip market.
On the 22nd (local time), Reuters reported that Huawei plans to supply its self-developed next-generation AI chip "Ascend 910C" in bulk to customers starting next month. The 910C graphics processing unit (GPU) is a product that packages two existing 910B processors into one, and it is known to have improved computational power and memory capacity by about twice compared to the previous version. Some evaluations suggest that the performance of the 910C can rival that of Nvidia's AI chip "H100." Huawei began distributing samples of the 910C to Chinese corporations late last year and has reportedly already begun delivering some quantities.
With the news that Huawei's latest AI chips will be officially supplied, Nvidia's stock price dropped nearly 5% at one point during the day. This reflects growing concerns among investors about Nvidia, which had controlled 90% of the Chinese AI chip market. Global investment banks also subsequently lowered their target prices for Nvidia. Bank of America (BoA) reduced its target price from $160 to $150, while Barclays cut its target from $175 to $155. Since the Trump administration tightened semiconductor export restrictions to China this month, Nvidia's stock price has fallen by 18.5% in a month.
The market is now evaluating that Nvidia's dominance in the Chinese market is already shaken. Stacey Rasgon, a senior researcher, noted in an interview with Yahoo Finance that "there is no need for investors to be overly concerned about Huawei’s mass supply of the latest AI chips to the Chinese market," adding, "Nvidia cannot compete in China anyway."
He made these remarks because the U.S. government continues to increase export barriers for AI chips to China. The U.S. Department of Commerce designated Nvidia's China-exclusive AI chip H20 as a separate export license item starting on the 9th of this month. Not only Nvidia but AMD's AI chip MI308 has also been added to the list of items requiring export licenses to China. Nvidia estimated that it would incur losses of about $5.5 billion (approximately 7.8 trillion won) in the first quarter of fiscal year 2025 (February to April), while AMD also anticipated losses of $800 million (approximately 1.1 trillion won).
Rasgon stated that "Nvidia can no longer compete with Chinese corporations," emphasizing that "it is not allowed." He further remarked, "We have essentially handed over the Chinese AI market to Huawei, so this outcome (the mass supply of Huawei's AI chips) is not surprising at all."
The market sentiment is cooling increasingly. Morgan Stanley noted that "new semiconductor export regulations to China could be more destructive than expected," predicting that Nvidia's data center revenue is expected to decline by 8 to 9% over the next few quarters. In fiscal year 2024, the share of China (including Hong Kong) in Nvidia's overall revenue was about 13% ($17.1 billion), but it is widely expected that this will drop to single digits this year.