The Bottom Line Upfront

NVIDIA faces pricing pressure for its H20 AI chip in China due to competition with Huawei's Ascend 910B and an oversupply in the market.

The Breakdown

  • U.S. Export Bans: The US Department of Commerce restricted NVIDIA's AI chip exports to China over military use concerns in late 2022.
  • H20 Chip Launch: NVIDIA introduced the H20 chip, a reduced-performance version of its H800 chip, specifically for the Chinese market to comply with US regulations.
  • Competitive Pricing: The H20 chip is sold at over a 10% discount compared to Huawei's Ascend 910B, priced at around 100,000 yuan per unit versus Huawei's 120,000 yuan.
  • Market Oversupply: An oversupply of H20 chips has driven prices down, exacerbating NVIDIA's challenges in the Chinese market amidst stiff local competition.
  • Spending Cuts: Major Chinese tech companies, including Alibaba, Baidu, ByteDance, and Tencent, have been advised to cut expenditures on foreign chips like NVIDIA's, increasing reliance on domestic alternatives.