NVIDIA finds itself caught between a rock and a hard place as the ongoing US-China tensions adversely impact its financials. The US, under President Biden, is causing difficulties for one of its largest hardware companies, NVIDIA, through various roadblocks. This is causing frustration for China and prompting them to move away from relying on NVIDIA’s products.
As a result, NVIDIA is losing orders for AI GPUs from China, and their competitors are capitalizing on this situation. The US government has warned that if companies try to bypass restrictions and continue supplying China, they will face further impediments. The US is particularly aggressive towards China, while China is countering this aggression with both short-term and long-term strategies.
The standoff is expected to severely damage NVIDIA’s balance sheet by 2024 as it will receive fewer orders for AI GPUs from China. NVIDIA is facing production and assembly issues with its three new AI GPUs designed for the Asian market. Additionally, there are confirmed delays, a high demand for GPUs globally, and a seemingly calmer US approach, which could be a smokescreen.
China is aware that the US is intentionally delaying the arrival of NVIDIA’s hardware and would rather see NVIDIA’s stock prices fall and post worse financials in 2024 than continue selling hardware to the Asian giant. It was reported that the delay of NVIDIA’s H20 chip is greater than initially expected, with mass production for this chip and its counterparts set to commence in Q2 of this year, aiming to have a substantial number of units by the summer.
China, however, will not wait. NVIDIA’s own data revealed that the performance of its new chips has dropped by up to 80% compared to the existing H100. Tech giants in China, such as Alibaba and Tencent, are said to have pressured NVIDIA into designing specific chips for them, which are currently being tested. The disappointing results, though, have led these companies and others to switch to domestic chipmakers instead.
Chinese companies like Baidu and ByteDance are now sourcing AI GPU orders from leading firms such as Huawei, Moore Threads, and others. Consequently, the US is indirectly forcing NVIDIA out of China, as the next generation of Chinese accelerators will be faster and cheaper than NVIDIA’s offerings. While they will not have NVIDIA’s ecosystem, they will have to develop and improve their own.
The ongoing clash between the world’s two largest powers continues to impact companies like NVIDIA, which has already lost AI GPU orders from China. It remains to be seen how they will react to this predicament.