Banning Nvidia Corp. (NASDAQ:NVDA) chips won’t stop China’s artificial intelligence development, according to Bernstein analysts, who suggest the export restrictions could instead strengthen domestic competitors like Huawei Technologies.
What Happened: “Banning the H20 would make no sense as its performance is already well below Chinese alternatives; a ban would simply hand the Chinese AI market completely over to Huawei,” Bernstein analysts wrote Wednesday, reported Business Insider.
The President Donald Trump administration is expected to require licenses for exporting powerful AI semiconductors to China, effectively creating an export ban, Nvidia disclosed in a regulatory filing last week.
The company anticipates a $5.5 billion charge related to inventory and purchase commitments for its H20 chip in the first quarter ending April 27.
Chinese companies have been reducing dependence on Nvidia by training models on unrestricted edge devices like personal computers and connecting Huawei chips with Nvidia processors. According to Bernstein’s channel checks, “most companies are able to carry on without H20 chips.”
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Why It Matters: Huawei is reportedly preparing mass shipments of its advanced 910C AI chip as early as next month. The chip reportedly matches Nvidia’s H100 performance by integrating two 910B processors into a single package, according to Reuters.
Huawei has doubled the yield rate of its AI chips from about 20% a year ago to approximately 40% now, making its Ascend chip production profitable for the first time, the Financial Times reported. The company aims to reach the industry standard of 60% yield.
Chinese AI companies focused on foundation model subscriptions face the biggest challenge transitioning from Nvidia’s proprietary CUDA software. Bernstein noted one Chinese company required 200 engineers and six months to migrate to Huawei chips, achieving only 90% of previous performance.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.