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Geopolitical tensions between Washington and Beijing continue to intensify regarding access to artificial intelligence and other advanced semiconductor technology.
The U.S. had imposed multiple semiconductor embargoes on China, restricting the latter’s exposure to cutting-edge technology from Nvidia Corp’s (NASDAQ:NVDA) and Taiwan Semiconductor Manufacturing Co (NYSE:TSM). The move is followed by China’s retaliation.
China has introduced energy efficiency rules for using advanced chips that would prevent Chinese companies from buying Nvidia’s tweaked processors, the Financial Times reported, citing documents they reviewed.
China’s National Development and Reform Commission urged Chinese groups to use tailor-made chips in new data centers and expansion of existing facilities.
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According to the report, Nvidia’s tailor-made chip for China, H20, failed to comply with the commission’s new rules.
Reportedly, the Chinese regulator has passively urged Alibaba Group Holding (NYSE:BABA), ByteDance, and Tencent Holding (OTC:TCEHY) against procuring H20 chips, signifying a threat to Nvidia’s $17 billion annual business in the country. China is Nvidia’s fourth-largest market.
Reportedly, Nvidia is eying a meeting between its senior executives and commission chair Zheng Shanjie. Also, Nvidia is ready with a solution to adjust H20 chips to meet the NDRC norms.
Tech powerhouses from Alibaba to Tencent aggressively ramped up their orders for H20 chips this year after DeepSeek launched its efficient reasoning model.
Reportedly, Huawei Technologies Co doubled the yield rate on its latest AI chips from around 20% a year ago to ~40% now. Huawei’s revenue grew by 22% in 2024, reaching 860 billion yuan ($118.27 billion).
In February, Nvidia reported fourth-quarter revenue of $39.3 billion, up 78%, beating a Street consensus estimate of $38.05 billion.
Nvidia expects first-quarter revenue of $43.0 billion, +/—2%, ahead of a street consensus estimate of $41.75 billion.
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