Nvidia's China AI Chip Strategy

Nvidia Develops Lower-Cost AI Chip for China

Facing US export restrictions on its high-end AI chips, Nvidia is reportedly launching a less expensive alternative specifically for the Chinese market. This new chip, expected to enter mass production in June, will be part of Nvidia's latest generation of AI processors.

Sources indicate the new chip will sell for $6,500–$8,000, significantly lower than the $10,000–$12,000 price tag of the restricted H20 model. The lower cost reflects simplified manufacturing and reduced specifications.

Navigating US Export Controls

An Nvidia spokesperson acknowledged the challenges, stating that until a new product design is finalized and approved by the US government, the company faces exclusion from China's significant $50 billion data center market. China represented 13% of Nvidia's sales in the past fiscal year.

The US government's April restrictions on the H20 chip exports to China stemmed from concerns about potential use in supercomputers. Nvidia CEO Jensen Huang noted a drop in market share in China from 95% before 2022 to 50% currently due to these export controls.

This is Nvidia's third attempt to create a China-compliant chip. The new design adheres to the US bandwidth limit of 1.7 terabytes per second.

Competition and Future Outlook

Nvidia's main competitor, Huawei, is also developing a competing AI chip, the Ascend 910D. Nvidia's upcoming earnings report (May 28th) will be closely watched, with analysts projecting strong year-over-year revenue growth despite the loss of H20 sales to China.

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