Nvidia Plans Cheaper AI Chip for China

Nvidia is planning to introduce a more affordable artificial intelligence chip for China, according to Reuters, after restrictions were placed on exporting its more expensive models.

Mass production of the new AI chip is planned to begin in June. It will be part of the company’s newest generation of AI chips, Reuters reported on May 26, citing sources familiar with the situation.

The chip is projected to sell for between $6,500 and $8,000 because of its simpler manufacturing needs and lower specs. For comparison, Nvidia’s recently restricted H20 model sold for around $10,000 to $12,000.

An Nvidia spokesperson told Reuters that the company is still assessing its limited options. According to the spokesperson, until a new product design is settled on and receives approval from the US government, the company is effectively excluded from China’s $50 billion data center market.

China makes up a significant portion of the chipmaker’s market, accounting for 13% of its sales in the last financial year.

In April, Nvidia was informed by the US government that export licenses were required for its H20 chips. The restrictions specifically mentioned China, citing concerns that the technology might be used in or diverted to a supercomputer in China.

Nvidia CEO Jensen Huang stated that the company’s market share in China has decreased from 95% before 2022, when US export restrictions first affected its products, to 50% currently. He said that they will continue to make efforts to optimize compliant products and keep serving the Chinese market.

This marks the company’s third attempt to develop China-compliant chips, with the new chip designed to meet the US bandwidth limit of 1.7 terabytes per second.

Nvidia’s primary competitor is Shenzhen-based Huawei, which is testing and getting ready to ship a new AI chip known as the Ascend 910D.

This news precedes the company’s quarterly earnings report, which is scheduled for release on May 28. Stock finished down approximately 3% last week, ending a streak of four consecutive weekly gains.

Analysts expect Nvidia to report quarterly revenue of $43.4 billion, a 66% increase year-over-year, and an adjusted net income of $21.3 billion, according to Investopedia.

Oppenheimer analysts stated they foresee upside, despite the loss of H20 sales to China.