- Chinese firms like Tencent, Alibaba, and ByteDance have significantly boosted orders for Nvidia’s H20 chip, driven by surging demand for DeepSeek’s cost-efficient AI models, with Nvidia (NVDA) shipping an estimated 1 million units in 2024 for over $12 billion in revenue.
- DeepSeek’s inference-focused models, rivaling Western systems at lower costs, have spurred a broad uptake of H20-equipped AI servers across sectors like healthcare and education, countering fears of declining chip demand and reinforcing Nvidia’s dominance in China despite U.S. export controls.
- While potential new U.S. restrictions loom, the order surge reflects DeepSeek’s impact – exemplified by Tencent’s WeChat tests and Great Wall’s vehicle integration – highlighting an AI-driven compute boom that’s lifted Nvidia’s stock after a January dip, leaving it down just over 5% year-to-date at $126.74 a share.
Nvidia’s (NVDA) H20 chip is riding a wave of surging demand in China, fueled by the meteoric rise of DeepSeek’s cost-efficient AI models, as Reuters reports citing six sources familiar with the matter. Tech titans Tencent, Alibaba, and ByteDance have sharply increased their orders for this China-specific chip – crafted to comply with U.S. export controls since October 2023 – since DeepSeek grabbed global attention last month, a trend that’s not just about stockpiling against potential new restrictions from the Trump administration but squarely tied to the startup’s innovative approach. DeepSeek’s large language models, which prioritize inference over raw horsepower, deliver Western-level performance at a fraction of the cost, flipping initial fears that it might dampen chip demand into a reality where it’s supercharging it, with Nvidia shipping an estimated 1 million H20 units in 2024 alone, raking in over $12 billion, per analyst estimates.
The ripple effect is profound—beyond the big three, who lean on H20s for both internal AI needs and cloud services powering other firms, smaller players in healthcare and education are snapping up AI servers packing DeepSeek models and Nvidia chips, a shift noted by a source at one of China’s top server makers who observed that such tech was once the domain of flush financial and telecom giants. This broadening adoption underscores Nvidia’s enduring dominance in China’s AI landscape, even as DeepSeek’s efficiency is expected to bolster local chipmakers like Huawei in the long run, though the H20 remains the go-to standard for now. Nori Chiou of White Oak Capital Partners in Singapore told Reuters that what seemed like a potential stall in compute demand has morphed into an exponential spike as advanced AI weaves deeper into everyday applications, a point proven by Tencent’s beta tests on WeChat and Great Wall’s integration into smart vehicles.
Nvidia’s staying tight-lipped on exact figures ahead of its Wednesday earnings report, simply stating its products win “on merit in a competitive field,” but the market’s already felt the tremors—January’s DeepSeek-driven AI stock rout saw Nvidia’s shares shed up to 20% before clawing back to a 5.5% year-to-date dip. Reuters highlights that while U.S. curbs, in place since 2022 to thwart military tech advances, limit Nvidia’s top-tier offerings in China, the H20’s tailored design keeps it legal and lucrative, despite looming threats of tighter controls. The unspoken scale of these orders only amplifies the story: DeepSeek’s not just a disruptor—it’s a catalyst, driving a compute boom that’s keeping Nvidia’s foothold firm in a market Washington watches warily.
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