Nvidia's China chip strategy stumbles: H20 discounted below Huawei rival
China business faces amid U.S. sanctions on AI chip exports and heightened competition, casting a cloud over its future in a market that contributed 17% to its revenue for fiscal 2024.The growing competitive pressure in China also adds a cautionary note to investors in the U.S.
semiconductor designer as its shares extended a stunning rally following Wednesday's bumper revenue forecast.Nvidia, which dominates the market for artificial intelligence (AI) chips, introduced three chips tailored for China late last year after U.S. sanctions prevented it from exporting its most advanced semiconductors.Among those chips, the H20 is the most closely watched as it's the most powerful Nvidia product sold in China, but the three supply chain sources told Reuters there is an abundant supply of the chip in the market, signalling weak demand.
That has seen H20 chips being sold in some cases at an over 10% discount to Huawei's Ascend 910B - the most powerful AI chip from a Chinese company - two of the three sources told Reuters, declining to be identified due to the sensitivity of the issue.Analysts said while Nvidia was trying hard to capture share in a market it cannot afford to lose, the outlook is increasingly uncertain.China's global share of the AI industry is projected to exceed 30% in 2035, according to a report by Chinese market research firm CCID Consulting."Nvidia is walking a fine line and working on a balancing act between maintaining the Chinese market and navigating U.S. tensions," said Hebe Chen, a market analyst at IG.
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