www.barchart.com <\/p>\n
Chinese AI startup DeepSeek, whose R1 reasoning model shook up the tech world and sparked a selloff in Nvidia and other tech stocks in January, recently\u00a0hinted that China would soon produce domestic \u201cnext-generation\u201d chips to power its AI models. In a comment on its official WeChat account, DeepSeek stated that the \u201cUE8M0 FP8\u201d precision format of its newly released V3.1 model is designed for the next-generation domestically produced chips set to launch soon. Notably, FP8, or 8-bit floating point, is a data format that can enhance computational efficiency in both training and inference of large deep learning models.<\/p>\n
Chinese semiconductor stocks recently staged a massive rally on hopes that more chips used in China will be produced domestically. DeepSeek\u2019s reference to China\u2019s upcoming next-generation chips may indicate an intention to work more closely with the country\u2019s growing AI chip ecosystem amid U.S. export restrictions on advanced semiconductors and Beijing\u2019s push for chip self-sufficiency. Kevin Xu, founder of AI-focused fund Interconnected Capital, wrote in a blog post that this could enable Chinese AI developers to close the gap with the U.S. \u201csooner than most people think, credibly challenging Nvidia and the American AI stack both at home and abroad.\u201d However, DeepSeek did not reveal which chips were used to train the V3.1 or specify which local chips the UE8M0 FP8 might be compatible with.<\/p>\n
Meanwhile, as Chinese chipmakers and AI developers expand their arsenal of homegrown technology, Nvidia\u2019s H20 chip, the most powerful AI processor it is allowed to sell in China, has been caught up in U.S.-China trade tensions. In July, U.S. President Donald Trump allowed Nvidia to resume H20 exports to China, overturning the ban that his administration had imposed in April. However, shortly afterward, Beijing told companies to hold off on purchasing the chips, citing potential security risks that Nvidia claims are unfounded. According to an official notice, Chinese regulators called in Nvidia representatives to discuss alleged \u201cbackdoor\u201d security risks related to the H20 chips. Bernstein analyst Qingyuan Lin said that the outcome of China\u2019s investigation into the \u201cbackdoor\u201d issue could determine the fate of the H20.<\/p>\n
Morningstar analyst Phelix Lee said that there is no guarantee Chinese-made chips will match Nvidia\u2019s performance, comparing the localization push to \u201cbrute forcing its way through\u201d complex computations. That said, demand for Nvidia\u2019s H20 chip in China remains strong. During the Q2 earnings call, Nvidia CFO Colette Kress stated that the company could ship between $2 billion and $5 billion worth of H20 chips to China this quarter if U.S. regulatory and \u201cgeopolitical issues\u201d are resolved. Analysts suggested that the geopolitical issues likely refer to Chinese authorities pressuring domestic firms to avoid purchasing Nvidia chips. Notably, Nvidia reported no new sales in China last quarter and expects zero AI chip sales to the country this quarter as well.<\/p>\n
Well, I view China as an important market for Nvidia. We clearly saw this importance reflected in Nvidia\u2019s Q2 earnings report. The company\u2019s Q2 data center revenue of $41.1 billion slightly missed consensus estimates, contributing to the post-earnings drop (along with Q3 revenue guidance that many considered soft, once again, mainly because China sales were accounted for as zero), as it took an approximately $4 billion hit from being unable to ship a single H20 chip to China during the quarter. Moreover, during the Q2 earnings call, Nvidia CEO Jensen Huang emphasized China\u2019s importance to the company\u2019s future, noting that the market could represent a $50 billion opportunity for Nvidia with 50% annual growth, while also stating there\u2019s a \u201creal possibility\u201d of selling its advanced Blackwell processor there.<\/p>\n
Meanwhile,\u00a0Reuters\u00a0reported in August that Nvidia is working on a new AI chip for China built on its latest Blackwell architecture, designed to be more powerful than the H20 model, which is based on the company\u2019s previous-generation Hopper platform. The new chip, provisionally named the B30A, will feature a single-die design expected to provide about half the raw computing power of the more advanced dual-die setup in Nvidia\u2019s flagship B300 accelerator card. U.S. President Donald Trump has hinted that he may permit more advanced Nvidia chips to be sold in China, but the report, citing sources, noted that U.S. regulatory approval is still far from certain.<\/p>\n
So, essentially, we\u2019re left with two clear options here. First, if the restrictions imposed by President Trump are eased, China stops discouraging domestic companies from purchasing Nvidia chips, and broader U.S.-China trade negotiations succeed, then the uncertainty surrounding China will fade, enabling the company to keep benefiting from sales in the country, which accounted for 13% of Nvidia\u2019s revenue in the last financial year. Notably, in August, CEO Huang reached an agreement with President Trump to resume sales to China by agreeing to give 15% of sales in the region to the government. The key point, however, is that the deal has not yet been finalized. And the second option is that everything stays as it is, with China\u2019s AI startups like DeepSeek continuing to rely more on domestic hardware for future model development. In that scenario, Nvidia would remain shut out of the world\u2019s second-largest computing market, forfeiting billions in potential revenue\u2014an outcome that would clearly be negative for the company.<\/p>\n
Of course, Nvidia will still be able to grow at a solid pace. However, it would likely be harder for it to meet investors\u2019 lofty expectations without access to the Chinese market, which I view as one of its growth drivers.<\/p>\n
Wall Street analysts remain very optimistic about Nvidia\u2019s growth outlook, as shown by its top-tier \u201cStrong Buy\u201d consensus rating. Of the 46 analysts offering recommendations for the stock, 38 rate it as a \u201cStrong Buy,\u201d two suggest a \u201cModerate Buy,\u201d five recommend holding, and one gives it a rare \u201cStrong Sell\u201d rating. The mean price target for NVDA stock is $210.49, suggesting a potential upside of 23.4% from current levels.<\/p>\n
www.barchart.com <\/p>\n
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally\u00a0published on Barchart.com<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"When it comes to artificial intelligence (AI), few companies have rattled Wall Street this year quite like DeepSeek.…\n","protected":false},"author":2,"featured_media":44569,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[261],"tags":[291,2725,289,290,381,18,19,17,3573,33511,292,82],"class_list":{"0":"post-44568","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-arsenal","10":"tag-artificial-intelligence","11":"tag-artificialintelligence","12":"tag-china","13":"tag-eire","14":"tag-ie","15":"tag-ireland","16":"tag-jensen-huang","17":"tag-nvda-stock","18":"tag-nvidia","19":"tag-technology"},"share_on_mastodon":{"url":"","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/44568","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/comments?post=44568"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/posts\/44568\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media\/44569"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/media?parent=44568"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/categories?post=44568"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/ie\/wp-json\/wp\/v2\/tags?post=44568"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}