Nvidia Faces New AI Chip Competition from Huawei:
Nvidia's stock price dropped by 2% on Monday, even as the S&P 500 went up by 0.2%. This happened because a Chinese company, Huawei Technologies, is reportedly getting ready to challenge Nvidia in the market for artificial intelligence (AI) chips.
According to The Wall Street Journal, Huawei has approached some Chinese tech companies to test its new chip called the Ascend 910D. Huawei hopes this new chip will be more powerful than Nvidia's H100 chip, which came out in 2022 and has since been followed by newer Nvidia chips like the Hopper series and the Blackwell AI semiconductors.
Currently, Nvidia is not allowed to sell its most advanced AI chips to companies in China. However, Huawei is already set to ship over 800,000 of its Ascend 910B and 910C chips to customers in China, including big state-owned phone companies and private AI developers like ByteDance, the owner of TikTok.
Nvidia's sales in China were already expected to decrease after the Trump administration announced new license requirements for future sales of its H20 AI accelerators, which were specifically designed to meet U.S. rules on AI exports to China. In fiscal year 2025, only 13% of Nvidia's sales came from billing addresses in China, a drop from 26% in fiscal year 2022.
Outside of China, it's believed that the competition from Huawei might not be as significant because Huawei is still behind Nvidia's latest technology. An independent analyst, Richard Windsor, noted that the main threat to Nvidia is in China, where government control might push companies to move away from Nvidia's software (CUDA) and instead learn to use Huawei's development platforms.
On a positive note for Nvidia, one of its major U.S. customers, Elon Musk's AI startup called xAI, is reportedly looking to raise $20 billion in funding. If this funding happens, a large portion of that money could be used to buy Nvidia's hardware, as xAI has already invested in hundreds of thousands of Nvidia's chips for its AI data centers.
Nvidia also announced on Monday that the first liquid-cooled GB200 NVL72 racks from Oracle, a software and cloud computing company, are now ready for customers. These racks contain many of Nvidia's chips working together.
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