US sanctions hampered Nvidia AI chip sales in China, though gaming GPU shipments increased.
Per an exclusive Reuters report, Nvidia has lost the number one spot in the Chinese AI chip market following the release of the sanctions-legal Nvidia H20, which slightly underperforms compared to the China-made Huawei Ascend 910B. The Huawei Ascend 910B is roughly 10% faster in AI workloads than Nvidia's top-end, sanctions-legal H20. Due to these performance issues, combined with Nvidia's abundant supply and sanctions restrictions, Nvidia has cut H20 prices by "over 10 percent" in the Chinese market. Distributors are selling the H20 at roughly 100,000 yuan, compared to the Huawei 910B, which can exceed 120,000 yuan per card. One of the companies that still supports Nvidia in China is the online marketplace Alibaba, which ordered over 30,000 Nvidia H20 chips.
The cost dynamics surrounding the H20 present significant challenges for Nvidia's profitability. According to SemiAnalysis founder Dylan Patel, the H20 costs "more than an H100 to manufacture due to its higher memory capacity" despite being sold for half the price, which he correctly points out as a "dramatic decrease in margin."
Beyond manufacturing constraints, Nvidia faces headwinds from Beijing encouraging Chinese companies to buy from Huawei first. With this pressure in place, Huawei is expected to "dramatically increase" its Ascend 910B shipments. Nvidia CFO Colette Kress acknowledged the market challenges, stating that "Our data centre revenue in China is down significantly from the level prior to" the new sanctions applied, and that they "expect the market in China to remain very competitive going forward."
On a brighter note for Nvidia, Chinese news site MyDrivers, citing Bobantang, claims the supply of RTX gaming GPUs to China has increased by at least 30% since May. However, the big money is clearly in the AI server and datacenter space, and geopolitical factors have removed Nvidia from its dominant position in China, a loss that appears difficult to reverse even if product performance favored the company.