Source: Broker China
Author: Shi Qian
A few days ago, the big model price war began. Today, news broke: AI chips are also starting a price war. According to Reuters,$NVIDIA (NVDA.US)$The price of H20 artificial intelligence chips supplied to the Chinese market was lowered.
Sources say that in some cases, the H20 chip sells for more than 10% less than the Huawei Ascend 910B. Chinese server dealers are selling H20 chips at a price of about RMB 100,000 per set, and each server with eight sets of chips costs between RMB 1.1 million and RMB 1.3 million.
Some market sources pointed out that Huawei only started competing with Nvidia last year. Sources said that Huawei will significantly increase shipments of its Ascend 910B chip this year, and the chip's performance is superior to the H20 in some key indicators.
Rob Arnott, chairman of Research Affiliates, a well-known quantitative investment company in the US, said on the 23rd local time that Nvidia's success in the market is based on the idea that it will continue to dominate the semiconductor industry in the future. But other chip giants should get involved. However, judging from now on, Nvidia's valuation is indeed too high.
Nvidia's China Strategy
Due to previous US sanctions, which prevented Nvidia's most advanced semiconductors from being exported to China, Nvidia launched three chips specially tailored for the Chinese market at the end of last year to circumvent related export policies. Among these chips, the H20 received the most attention because it is the most powerful product sold in China. However, according to Reuters, three supply chain sources said that the chip is in sufficient supply in the market, indicating weak demand. In some cases, the H20 chip sells for more than 10% less than the Huawei Ascend 910B (the Chinese company's most powerful AI chip).
Nvidia Chief Financial Officer Colette Kress said earlier: “Compared to before the new export control restrictions were implemented in October, our data center revenue in China has dropped dramatically. We anticipate that competition in the Chinese market will continue to be fierce in the future.”
In the past six months, only five countries or state-affiliated buyers expressed interest in purchasing H20 chips, while the number of buyers of Huawei 910B chips reached more than a dozen during the same period. According to sources, some Chinese tech giants have already placed orders.$Alibaba (BABA.US)$/$BABA-SW (09988.HK)$I just ordered over 30,000 H20 chips. However, Ali did not publicly respond to this.
The price of a single H20 server card currently sold by Chinese server dealers is around 100,000 yuan, and the price of a single card for an eight-card server is 1.1 million yuan to 1.3 million yuan. In contrast, the price of a single Huawei 910B card sold by distributors is over 120,000 yuan, while the price of a single card for an eight-card server ranges from 1.3 million yuan to 1.5 million yuan. According to industry insiders, the prices of the H20 and Huawei 910B will fluctuate according to the size of the order volume.
Dylan Patel, founder of the research institute SemiAnalysis, said that nearly 1 million H20 chips will be shipped to China in the second half of 2024, and Nvidia must compete with Huawei in terms of price. Due to the larger memory capacity, the H20 is more expensive to produce than the H100. However, the price of the H20 is only half that of the H100.
Nvidia's top three variables
Looking at it now, Nvidia has three major variables: one is valuation, the second is competitors, and the third is business in China.
By Thursday's close, Nvidia had risen 9.32%, and its stock price was stable at the $1,000 mark, and its total market capitalization reached $2.55 trillion. However, its valuation level is not low. The company's price-earnings ratio (TTM) has reached nearly 60 times, the net price-earnings ratio is close to 52 times, and the price-sales ratio has reached 40 times. This cannot be said by any means; valuations are low. Moreover, judging from a horizontal comparison, Nvidia's total market capitalization exceeds that of all listed companies in Germany combined. According to the data, as of Wednesday, the total market value of companies that first went public in Germany was about 2.51 trillion US dollars.
Furthermore, although Nvidia currently has absolute dominance, it is also facing many rivals. Earlier, in documents submitted to the US Securities and Exchange Commission, Nvidia identified Huawei as the biggest competitor in various categories such as artificial intelligence chips for the first time. Other competitors mentioned by Nvidia include$Intel (INTC.US)$,$Advanced Micro Devices (AMD.US)$,$Broadcom (AVGO.US)$und$Qualcomm (QCOM.US)$In addition, it also lists many important cloud computing companies, such as$Amazon (AMZN.US)$und$Microsoft (MSFT.US)$. And just yesterday, Nvidia's newest competitor Groq revealed that the company had indicated to investors that it wanted to raise around $300 million. One and a third said that Groq had hired Morgan Stanley to help raise capital. Groq's total funding will roughly double in this round, bringing it closer to startup competitors such as Cerebras.
Then there's the Chinese business. China's share of the global artificial intelligence industry is expected to exceed 30% by 2035, according to a report from Chinese market research firm CCID Consultants. However, on the one hand, Nvidia's most powerful chips have been banned from being sold to China, and on the other hand, there are better chips in China than Nvidia's specially supplied chips for China. Analysts believe that the price dispute highlights the challenges faced by Nvidia's Chinese business in the face of US sanctions against AI chip exports and increased competition, and the Chinese market, which contributed 17% of its revenue, cast a shadow over the company's 2024 fiscal year.
IG market analyst ?$#@$ Chen said, “Nvidia is taking a delicate line and trying to find a balance between maintaining the Chinese market and dealing with US tension. Nvidia is definitely preparing for the worst in the long run.”
Editor/jayden