Nvidia Corp NVDA stock is trading up Thursday amid reports of the chip designer initiating pre-orders for its new artificial intelligence (AI) chip, the H20, tailored specifically for the Chinese market, competing directly with Huawei Technologies Co’s product at similar price points.
Developed in response to expanded U.S. restrictions on high-end chip exports, the H20 is part of Nvidia’s strategy to navigate technological limitations that could advance China’s military AI and computing capabilities.
Despite being less powerful than Nvidia’s flagship H100 and the previously banned H800, the H20’s performance also seems to fall short in some aspects compared to Huawei’s Ascend 910B, Reuters cites industry sources.
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The H20 chip, priced between $12,000 and $15,000, is being marketed by distributors at a significant markup, closely matching the cost of Huawei’s 910B chip.
Central to servers designed for AI tasks, Nvidia will likely deliver these chips in varying quantities throughout 2024, signaling the ongoing competition in China’s AI chip market, where Nvidia once held over a 90% share.
Despite the H20’s lower FP32 performance than the 910B, it reportedly offers superior interconnect speeds, making it competitive for systems requiring extensive chip communication.
This launch is a crucial part of Nvidia’s broader effort to maintain its presence in China amid increasing domestic competition and the impact of U.S. sanctions.
In 2023, China noted a 14% jump in imports of chipmaking machines, reaching nearly $40 billion.
It reflects Chinese chip companies’ efforts to build new semiconductor factories and boost national capabilities.
Reports indicated that Chinese cloud companies, including Alibaba Group Holding Limited BABA, sourcing nearly 80% of high-end AI chips from Nvidia, could trim orders by 50%-60% within five years.
To beat the embargo, Nvidia continues developing a less potent variant of its GTX 4090 D premier gaming chip in China.
Nvidia stock gained 194% last year, beating broader indexes by a huge margin, thanks to the AI frenzy. Analysts have their bets on the stock as the big tech companies splurge on the technology.
Nvidia has a close to 8% exposure to Direxion Daily Semiconductor Bull 3x Shares SOXL, a 3X leveraged fund encompassing semiconductor stocks.
Price Action: NVDA shares traded higher by 0.93% at $620.98 premarket on the last check Thursday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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