Nvidia plans to make cheaper AI chips for China: Report

Nvidia will reportedly launch a new lower-cost artificial intelligence chip specifically for China, following restrictions on exporting its more expensive model.

Nvidia plans to start mass production of the new AI chips in June, which will be part of the firm’s latest generation of AI chips, Reuters reported on May 26, citing people familiar with the matter.

The company plans to sell it for between $6,500 and $8,000 owing to its lower specifications and simple manufacturing requirements — cheaper than the some $10,000 to $12,000 Nvidia’s recently restricted H20 model sold for.

An Nvidia spokesperson told Reuters it was still evaluating the company’s limited options. “Until we settle on a new product design and receive approval from the US government, we are effectively foreclosed from China’s $50 billion data center market,” they said.

China is a massive market for the chipmaker, accounting for 13% of its sales in the past financial year.

In April, the US government informed Nvidia that export licenses were required for its popular H20 chips. The restrictions specifically mentioned China, and the government cited concern over the risk that the technology “may be used in, or diverted to, a supercomputer in China.” 

According to Nvidia CEO Jensen Huang, its market share in China has plummeted from 95% before 2022, when US export restrictions first impacted its products, to 50% currently. 

“We will continue to make tremendous efforts to optimize compliant products and continue serving the Chinese market,” he said on Taiwanese TV last week.

It is the company’s third attempt to create China-compliant chips, and the new chip is designed to meet current US bandwidth limits of 1.7 terabytes per second. 

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Nvidia’s main rival is Shenzhen-based Huawei, which is testing and preparing to ship a new AI chip called the Ascend 910D. 

The news comes a couple of days before the firm is due to release its quarterly earnings report, which is due on May 28. 

The chip manufacturer’s stock finished last week down around 3%, breaking a streak of four straight weekly gains.

Analysts on average expect Nvidia to report quarterly revenue of $43.4 billion, 66% higher year-over-year, and adjusted net income of $21.3 billion, according to Investopedia. 

“We see upside … despite the loss of H20 sales to China,” said Oppenheimer analysts. 

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