It's rolled up again!
A few days ago, a price war broke out for large models. Today, news came that artificial intelligence chips have also engaged in a price war. According to Reuters, Nvidia has lowered the price of H20 artificial intelligence chips supplied to the Chinese market.
Sources say that in some cases, The price of H20 chips is more than 10% lower than that of Huawei Ascend 910B. Chinese server distributors are selling H20 chips at a price of approximately RMB 100000 per set, with each server equipped with eight sets of chips priced between RMB 1.1 million and RMB 1.3 million.
Market insiders have pointed out that Huawei only started competing with Nvidia last year. Sources say that Huawei will significantly increase its shipment of Ascend 910B chips this year, and the chip will perform better than H20 in some key indicators.
Robert Arnott, Chairman of Research Associates, a well-known quantitative investment company in the United States, stated on the 23rd local time that Nvidia's success in the market is based on its idea of continuing to dominate the semiconductor industry in the future. But other chip giants should be involved. From the current perspective, Nvidia's valuation is indeed on the high side.
NVIDIA's China Strategy
Due to previous US sanctions that prevented Nvidia from exporting its most advanced semiconductors to China, Nvidia launched three chips specifically designed for the Chinese market at the end of last year to avoid related export policies. Among these chips, H20 is the most popular because it is the most powerful product sold in China. However, according to Reuters, three supply chain professionals stated that there is sufficient supply of the chip in the market, indicating weak demand. In some cases, The price of H20 chips is more than 10% lower than Huawei Ascend 910B (the most powerful AI chip of Chinese companies).
Nvidia CFO Colette Kress previously stated, "Compared to before the implementation of new export control restrictions in October, our data center revenue in China has significantly decreased. We expect competition in the Chinese market to remain fierce in the future."
In the past six months, only five countries or national affiliated buyers have expressed interest in purchasing H20 chips, while the number of buyers of Huawei 910B chips during the same period has reached more than ten. According to sources, some Chinese technology giants have already placed orders, with Alibaba ordering over 30000 H20 chips. But Alibaba did not respond publicly to this.
The current single card price of H20 servers sold by Chinese server distributors is around 100000 yuan, while the single card price of eight card servers ranges from 1.1 million yuan to 1.3 million yuan. In contrast, the Huawei 910B single card sold by distributors costs over 120000 yuan, while the single card price for eight card servers ranges from 1.3 million yuan to 1.5 million yuan. Industry insiders say that, The prices of H20 and Huawei 910B will fluctuate depending on the size of the order volume.
Dylan Patel, founder of research firm SemiAnalysis, said that nearly one million H20 chips will be shipped to China in the second half of 2024, and Nvidia must compete with Huawei in terms of price. Due to the larger memory capacity, The production cost of H20 is higher than that of H100. However, the selling price of H20 is only half of H100.
Nvidia's three variables
From the current perspective, Nvidia has three major variables: valuation, competitors, and business operations in China.
As of Thursday's close, Nvidia rose 9.32%, its stock price remained stable at the $1000 mark, and its total market value reached $2.55 trillion. However, its valuation level is not low, with a price to earnings ratio (TTM) of nearly 60 times, a price to book ratio of nearly 52 times, and a price to sales ratio of 40 times. It cannot be said that the valuation is at a low level. Moreover, from a horizontal comparison perspective, Nvidia's total market value exceeds the total market value of all listed companies in Germany. According to data, as of Wednesday, the total market value of companies that have gone public in Germany is approximately $2.51 trillion.
In addition, although Nvidia currently dominates, it also faces many competitors chasing after it. Previously, NVIDIA identified Huawei as the largest competitor in multiple categories, including artificial intelligence chips, for the first time in its filing with the US Securities and Exchange Commission. Other competitors mentioned by NVIDIA include Intel AMD、 Broadcom and Qualcomm have also listed many important cloud computing companies, such as Amazon and Microsoft. And just yesterday, Groq, NVIDIA's latest rising competitor, revealed that the company has expressed its desire to raise approximately $300 million to investors. One person and a third person said, Groq has hired Morgan Stanley to help raise funds. The total financing amount of Groq will increase by about twice as a result of this round of financing, making it closer to competitors of startups such as Cerebras.
Another thing is the Chinese business. According to a report by CCID Consulting, a Chinese market research firm, China's share in the global artificial intelligence industry is expected to exceed 30% by 2035. On the one hand, Nvidia's most powerful chips have been banned from being sold to China, and on the other hand, there have been more excellent chips in China than those supplied by Nvidia. Analysts believe that the above price dispute highlights the challenges faced by Nvidia's China business in the face of sanctions and intensified competition on artificial intelligence chip exports in the United States, contributing 17% of its revenue to the Chinese market, casting a shadow over the company's 2024 fiscal year.
IG market analyst Hebe Chen said, "Nvidia is taking a subtle path, striving to find a balance between maintaining the Chinese market and dealing with the tense situation in the United States. In the long run, Nvidia is certainly preparing for the most unfavorable situation."
