- Nvidia’s (NVDA) stock rose to $117.51 in premarket trading as the company plans to launch a downgraded H20 AI chip for China in July, complying with U.S. export restrictions that now require a license for the original model.
- The modified H20 chip, featuring reduced memory capacity, aims to maintain Nvidia’s $17 billion Chinese market, which accounted for 13% of its sales in the fiscal year ended January 26, amid $18 billion in H20 orders since January.
- CEO Jensen Huang’s recent Beijing visit underscored China’s strategic importance, as tech giants like Tencent and Alibaba (BABA) drive demand for the H20 chip despite U.S. curbs on advanced semiconductor exports since 2022.
Nvidia’s (NVDA) stock ticked up to $117.51 in premarket trading on Friday, reflecting investor confidence in the $2.86 trillion AI chipmaker’s strategic pivot to navigate U.S. export restrictions targeting China, according to a Reuters report. The company is set to release a downgraded version of its H20 artificial intelligence chip for the Chinese market in July, a move prompted by Washington’s decision last month to require an export license for the original H20 model. This follows a broader U.S. policy, in place since 2022, to curb exports of advanced semiconductors to China over concerns about potential military applications, with tightened controls introduced in October 2023.
The modified H20 chip, designed to comply with new U.S. regulations, will feature significantly reduced memory capacity and other technical downgrades, as Nvidia has outlined new specifications to guide its development, Reuters noted. Despite these limitations, one source indicated that downstream customers could adjust the chip’s module configuration to optimize performance, offering some flexibility for Chinese buyers. Nvidia has already informed major clients, including leading cloud computing providers, of the upcoming release, signaling its commitment to maintaining a foothold in China, which generated $17 billion in revenue – 13% of the company’s total sales – in the fiscal year ended January 26.
The urgency of Nvidia’s response underscores China’s critical role in its global strategy, a point emphasized by CEO Jensen Huang during his visit to Beijing last month, shortly after U.S. officials imposed the new export license requirement. Huang’s meetings with Chinese officials highlighted the market’s strategic importance, particularly as Chinese tech giants like Tencent, Alibaba, and ByteDance have ramped up orders for the H20 chip. Reuters reported earlier this year that demand for cost-effective AI models, driven by companies like startup DeepSeek, has fueled this trend. Since January, Nvidia has amassed $18 billion in H20 orders, a testament to the chip’s appeal despite regulatory hurdles.
Nvidia’s efforts to adapt the H20 chip reflect the broader geopolitical tensions shaping the semiconductor industry, where technological leadership and national security concerns intersect. The original H20, introduced after the 2023 export control tightening, was Nvidia’s most powerful AI chip approved for sale in China until the recent licensing requirement disrupted its market access. By developing a downgraded version, Nvidia aims to balance compliance with U.S. regulations and the need to serve a key market. Investors appear cautiously optimistic, as evidenced by the stock’s premarket gain, though the long-term impact of these restrictions on Nvidia’s growth in China remains a focal point for the industry.
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