Background on NVIDIA and its Relevance
NVIDIA Corporation, a leading technology company valued at over 4.2 billion dollars, experienced a decline in its stock price on Wednesday following an order from the Chinese government. The company is renowned for its advanced chips, including the RTX Pro 6000D AI chips, which are crucial for artificial intelligence applications.
Chinese Government’s Action and Impact
According to sources from the British newspaper Financial Times, the Chinese government mandated companies such as Alibaba and ByteDance to terminate AI chip testing and cancel existing orders for NVIDIA’s RTX Pro 6000D chips. This action led to a decrease in NVIDIA’s stock price, which closed at 170.33 dollars per unit on Wall Street, a 2.6% drop.
Chinese Companies and Regulatory Scrutiny
Chinese companies had reportedly requested tens of thousands of chips, initiated testing and verification with NVIDIA’s server providers, only to be instructed to halt operations after receiving the order from China’s Internet regulator. Recently, Chinese regulators have summoned Huawei and local chip manufacturers, along with Alibaba and Baidu—companies that produce their own semiconductors—to report on the comparison of their products with NVIDIA’s custom-made chips for China.
Implications for US-China Trade Relations
This development could impact the efforts of the US and Chinese governments to overcome trade tensions, aiming to sell modified versions of NVIDIA’s chips in the world’s second-largest economy. In mid-August, US President Donald Trump designed an agreement that granted NVIDIA licenses to sell H2O chips to China in exchange for a 15% cut on those sales.
NVIDIA’s CEO Response
NVIDIA CEO Jensen Huang addressed the situation on Wednesday, stating that both the US and China have broader agendas to resolve amidst the complex US-China trade war. He emphasized that NVIDIA can only serve a market if a country desires it, expressing disappointment with the Chinese regulations but maintaining patience regarding the broader US-China issues.
US Restrictions and Chinese Retaliation
The US administration has limited China’s access to advanced chips, while China has responded by pressuring national companies to distance themselves from US providers. Michael Ashley Schulman, Director of Investments at Running Point Capital Advisors, described Jensen Huang’s diplomatic comment as “we’re pawns in a digital Cold War.”
Key Questions and Answers
- What caused the drop in NVIDIA’s stock price? The Chinese government ordered companies to cancel orders for NVIDIA’s AI chips, leading to the stock price decline.
- Which Chinese companies were involved in this situation? Alibaba, ByteDance, Huawei, and other local chip manufacturers were summoned by Chinese regulators to report on their products compared to NVIDIA’s custom-made chips for China.
- How did the US and China aim to address trade tensions? The US and China sought to sell modified versions of NVIDIA’s chips in China, as per an agreement allowing NVIDIA to sell H2O chips to China with a 15% sales cut.
- What is Jensen Huang’s stance on the situation? Huang acknowledged broader agendas between the US and China, expressing disappointment with Chinese regulations but maintaining patience regarding these issues.
