Nvidia, the leading manufacturer of innovative AI chips, has been hit with an unexpected blow from Chinese authorities. In a protective move, China decided to support its domestic manufactures by pushing local companies to buy chips made by Huawei.
As a result, Nvidia was forced to reassess its pricing strategy, slashing the price of its most advanced AI chip designed specifically for the Chinese market.
In late 2023, Nvidia introduced three AI chips tailored for China, responding to US sanctions on exporting high-end semiconductors to the country, including the H20 chip. This chip is considered Nvidia's most powerful product available in China. However, its abundant supply has led to a significant drop in demand. Consequently, H20 chips are now being sold at a discount of more than 10% to rival Huawei's Ascend 910B.
Meanwhile, China-based Huawei plans to ramp up shipments of its Ascend 910B chips in 2024. This raises concerns about Nvidia's continued presence in the Chinese market. US sanctions and stiff competition from Chinese companies add fuel to the fire. The growing competitive pressure in the Asian country serves as a cautionary note to investors in Nvidia, whose shares have surged following a recent upbeat earnings estimate.
