Nvidia’s stock price has soared since OpenAI’s ChatGPT became the fastest app to reach one million users in 2022.
ChatGPT’s success unleashed a torrent of artificial intelligence research and development, forcing a major overhaul of enterprise and cloud network infrastructure. Nvidia, the leading maker of graphics processing units, or GPUs, ideally suited to training and operating AI apps has been the biggest beneficiary of the spending tsunami.
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Nvidia’s revenue has soared, and because its AI GPUs are highly profitable, its earnings have similarly skyrocketed, helping lift its shares by 171% in 2024 alone.
While companies are expected to continue investing in AI apps this year, Nvidia has been dealt a series of blows this year that have caused its share price to tumble, including news out of China over the weekend that further challenges its AI-chip leadership.
Nvidia CEO Jensen Huang faces a slate of obstacles in China, formerly a major market for its chips.
Nvidia’s China headache worsens
Nvidia dominates the semiconductor chip market for AI research and development worldwide, but growing tensions between the U.S. and China have caused its sales to slump in the Middle Kingdom.
Worries that China might use next-generation technology like AI against the U.S. someday have increased over the past few years, prompting significant restrictions on U.S. technology exports, including Nvidia’s AI chips.
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Initially, Nvidia was able to engineer AI chips that met export restrictions, helping it maintain revenue there. However, that’s become increasingly difficult as restrictions have tightened.
As a result, Nvidia’s sales in China have declined sharply. Nvidia CEO Jensen Huang says sales are “about half of what it was before the export control.”
Last month, news broke out that President Trump’s administration was strengthening export restrictions and effectively shut off Nvidia’s H20 chip exports, specifically designed for that market. The change led Nvidia to surprise the market by announcing it would take a $5.5 billion write-off in the first quarter on its remaining H20 inventory.
The loss of a key market came alongside President Trump’s announcement of reciprocal tariffs on China, which started a trade war.
The tit-for-tat has increased U.S. tariffs on Chinese imports to 145% and China’s U.S. imports to 125%—high enough to effectively curb trade between the two major economies.
The company’s China headaches have contributed to Nvidia’s stock price falling about 20% this year.
Nvidia rival Huawei deals a major blow
As if the challenges weren’t steep enough, Nvidia’s Chinese competitor, Huawei, has announced a new AI chip to challenge Nvidia’s dominance.
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Huawei is a major manufacturer of technology ranging from computer chips to smartphones, with revenues near $100 billion and over 200,000 employees.
The Ascend 920, using SMIC’s 6-nanometer technology, would be the successor to Huawei’s 910C and 910D. The 910 series is historically built on 7-nanometer technology. The 920 may offer performance that rivals Nvidia’s H20, while the 910C and 910D rival Nvidia’s popular H100 chip performance.
The 920 chip is expected in late 2025.
Until then, the Wall Street Journal reports testing on the 910D will begin in May, and the company says its 910C production will ramp in the second half to potentially meet demand for AI chips from Chinese high-tech companies ByteDance, Alibaba, and Tencent.
The possibility that Huawei could permanently fill the void left by Nvidia before Nvidia can craft a new solution for the Chinese market could mean billions of dollars in lost revenue.
Nvidia’s shares are down over 3% at 2:30 pm EST
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