How Do Chipmakers Avoid The China Bans? Nvidia Might Have Something Up Its Sleeve

How Do Chipmakers Avoid The China Bans? Nvidia Might Have Something Up Its Sleeve

Mizuho analyst Vijay Rakesh reiterated a Buy and $225 price target on Nvidia Corp NVDA.

Mizuho hosted NVDA's VP of Accelerated Computing, Ian Buck, and IR Simona Jankowski during its 4th Annual Mizuho Storage & AI Virtual Series. 

U.S. restricted sales of Nvidia's high-performance AI chips for servers, the A100 and H100, to China and Russia, citing national security concerns. 

The U.S. also urged Advanced Micro Devices, Inc AMD to stop exporting its MI250 chips to China.

The chipmakers' share prices and the iShares Semiconductor ETF SOXX came under significant pressure on September 7 following the embargo.

However, Rakesh saw that the restriction could provide access, focusing on a workaround as a priority over the next few months.

He believes China OEMs can still access U.S. cloud AI services. NVDA could still seek selective licenses with more focus on a workaround solution to the A100/H100 for transformer AI training into China hyperscalers, though subject to the same geopolitical risks. 

Hopper development is on track and shipping to key customers, with most of the development in the U.S., Rakesh noted. The Hopper ramp remains unaffected by the ban due to U.S.'s exemptions over supply chain freedom, he noted.

Compared to the A100, the H100 utilizing HBM3 from HBM2e memory drives a 1.5x improvement in bandwidth to ~3Tbps. 

He also emphasized Hopper reduces the number of GPUs by 7x versus A100, with superior training performance and HPC compute performance, with Hopper H100 already shipping to some key customers and interest is high. 

NVDA also noted data centers exploring water cooling with DGX H100 >50% power consumption versus DGX A100 

Overall, the rising complexity drives a need for more robust software capabilities for optimization, with NVDA having noted it has a higher mix of software engineers versus hardware, Rakesh wrote in the analyst note. He believes this is a crucial reason behind NVDA's dominance in the AI space. 

NVDA accounts for >90% of all AI workloads, despite disruptors like Cerebras, and is pushing the envelope towards more incredible AI adoption growth. 

Price Action: NVDA shares traded higher by 3.26% at $144.46 on the last check Friday.

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