qualityarcades| Nvidia, big news! involving China

Roll it up againQualityarcadesYes!

A few days ago, the big model price war began. Today, there is news that artificial intelligence chips are also fighting a price war. According to Reuters, Nvidia has cut its supply to the Chinese market.QualityarcadesThe price of H20 artificial intelligence chip.

In some cases, the price of the H20 chip is more than 10 per cent lower than that of Huawei Ascend 910B, according to sources. Chinese server dealers are selling H20 chips at a price of about 100000 yuan per set, while servers with eight sets of chips sell for between 1.1 million yuan and 1.3 million yuan each.

Some market participants pointed out that Huawei only began to compete with Nvidia last year. Huawei will significantly increase its shipments of its Ascend 910B chip this year, and the chip outperforms H20 in some key indicators, according to sources.

Rob Arnault, chairman of Research Affiliates, a well-known US quantitative investment company, said on the 23rd that Nvidia's success in the market is based on the idea that it will continue to dominate the semiconductor industry in the future. But other chip giants should be involved. For now, Nvidia's valuation is indeed on the high side.

Nvidia's China Strategy

Nvidia launched three chips tailored for the Chinese market at the end of last year to circumvent export policies because of US sanctions that prevented Nvidia from exporting its most advanced semiconductors to China. Among these chips, the H20 attracts the most attention because it is the most powerful product sold in China. However, three people in the supply chain said there was an ample supply of the chip on the market, indicating weak demand, according to Reuters. In some cases, the H20 chip costs more than 10 per cent less than Huawei Ascend 910B, the most powerful AI chip in Chinese companies.

Klaette Kress, Nvidia's chief financial officer, had previously said: "our data centre revenue in China has fallen significantly compared with before the new export control restrictions were imposed in October. We expect that the competition in the Chinese market will remain very fierce in the future. "

In the past six months, only five countries or national affiliated buyers have expressed interest in buying H20 chips, compared with more than a dozen buyers of Huawei 910B chips in the same period. According to informed sources, some Chinese technology giants have placed orders, and Alibaba has ordered more than 30000 H20 chips. But Ali did not respond publicly.

The price of H20 server single card sold by Chinese server dealers is about 100000 yuan, and the price of eight-card server single card is between 1.1 million yuan and 1.3 million yuan. By contrast, the single card price of Huawei 910B sold by distributors is more than 120000 yuan, while the single card price of eight-card server is 1.3 million yuan to 1.5 million yuan. According to industry insiders, the prices of H20 and Huawei 910B will fluctuate according to the size of orders.

Dylan Patel, founder of research firm SemiAnalysis, said that nearly 1 million H20 chips will be shipped to China in the second half of 2024 and Nvidia will have to compete with Huawei on price. Because of the larger memory capacity, the production cost of H20 is higher than that of H100. But the price of the H20 is only half that of the H100.

Three variables of Nvidia

For now, Nvidia has three big variables: valuation, competitors and business in China.

As of Thursday's close, Yingweida is up 9%.Qualityarcades.32%, the stock price stood steadily above the $1000 mark, and the total market capitalization reached 2.Qualityarcades.55 trillion dollars. However, its valuation is not low, with a price-to-earnings ratio (TTM) of nearly 60 times earnings, a price-to-book ratio of nearly 52 times and a price-to-sales ratio of 40 times. Under no circumstances can it be said that valuations are low. Moreover, from a horizontal comparison, the total market capitalization of Nvidia is more than that of all listed companies in Germany combined. As of Wednesday, the total market capitalization of companies listed in Germany was about $2.51 trillion, according to the data.

In addition, although Nvidia is absolutely dominant at the moment, it is also being pursued by many competitors. Earlier, Nvidia identified Huawei as the biggest competitor in multiple categories, including artificial intelligence chips, in filings with the Securities and Exchange Commission. Other competitors mentioned by Nvidia include Intel, AMD, Broadcom and Qualcomm, as well as a number of important cloud computing companies, such as Amazon and Microsoft. And just yesterday, Groq, Nvidia's latest emerging competitor, revealed that the company had told investors it wanted to raise about $300m. One and a third said Groq had hired Morgan Stanley to help raise money. As a result, the total amount raised by Groq will about double, bringing it closer to start-up competitors such as Cerebras.

Then there is the Chinese business. According to a report by Sadie, a Chinese market research firm, China's share of the global artificial intelligence industry is expected to exceed 30% by 2035. But on the one hand, Nvidia's most powerful chips are banned from being sold to China, and on the other hand, there are better chips than Nvidia's Chinese chips. Analysts believe the price dispute highlights the challenges facing Nvidia's China business amid US sanctions and increased competition for artificial intelligence chip exports. The Chinese market, which accounts for 17 per cent of its revenue, cast a shadow over the company in fiscal 2024.

Hebe Chen, market analyst at IG, said: "Nvidia is taking a delicate route, trying to strike a balance between maintaining the Chinese market and dealing with tensions in the United States. In the long run, Nvidia must also be preparing for the worst. "

Editor-in-chief: Yang Yucheng