NVIDIA revealed that it has yet to sell the H20 AI chips after the Trump administration lifted the export controls, but this time, the barrier isn't the USG; it's actually China.
NVIDIA's H20 AI Chips Become a Victim of 'Geopolitical Tensions', Causing Huge Concerns For Team Green
Team Green reported its Q2 earnings a few hours ago, and apart from all the specifics, one element that was missing was the company's business with China, which has been paused for several quarters now. We did see optimism around H20 being available for Beijing when the Trump administration permitted NVIDIA to sell AI chips to China, but what actually happened was that resentment started to come in from China itself on NVIDIA's AI chips, as the nation claimed presence of security backdoors which we'll discuss ahead.
NVIDIA reported in its latest earnings that there were 'no H20 sales' to China-based customers in the second quarter, apart from previous orders placed that were delivered. This is why there's a mention of a 'mysterious' customer who bought $650 million of H20 AI chips, which were "previously reserved" inventory, and it hasn't been included in the Q2 figures. The situation is a deadlock for NVIDIA, since its customers are reluctant to adopt the firm's tech stack, which poses a serious concern about the company's future in China.
Beijing's regulatory authority opened an investigation to find security backdoors in the H20 AI chips. This sentiment was mainly driven by President Trump's making it a 'national policy' to integrate security measures under his AI action plan. This prompted China to convince domestic tech giants to avoid buying NVIDIA's AI chips, and instead adopt a 'fully-domestic' tech stack, prepared by the likes of China and Cambricon. However, shifting to it isn't as easy as it might sound, and it isn't something that Chinese firm can do overnight.
NVIDIA believes that if H20 AI chip sales are initiated in China, they can at least expect $2 billion to $5 billion worth of revenue from the region, with the inventory in their hands. More importantly, Team Green is hoping to flood China's AI market with a more capable 'Blackwell-based' solution, so it basically becomes unavoidable for domestic firms to adopt NVIDIA's powerful chips, and Jensen is even willing to give a portion of the firm's revenue to the USG for such a deal.
Getting access to China is a huge deal for NVIDIA and Jensen right now, and it is one of the most pivotal moves for the company, given that they are missing out on at least 'tens of billions' in revenue. More importantly, domestic firms like Huawei are catching up in the race, which might pose a threat to America's dominance in the AI tech stack.
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