In a new move to challenge Nvidia’s (NVDA) lead, China is cutting power costs for firms that use local AI chips. Regions like Gansu, Guizhou, and Inner Mongolia are offering subsidies that cut electricity bills by up to 50% for data centers powered by Chinese-made chips. The move is part of Beijing’s plan to reduce reliance on U.S. technology and strengthen its own chip industry.
Meet Your ETF AI Analyst
- Discover how TipRanks' ETF AI Analyst can help you make smarter investment decisions
- Explore ETFs TipRanks' users love and see what insights the ETF AI Analyst reveals about the ones you follow.
The new subsidies come after Alibaba (BABA), Tencent (TCEHY), and ByteDance raised concerns about high power costs. Local chips from Huawei and Cambricon use 30% to 50% more energy than Nvidia’s H20 GPUs, making them more expensive to operate. By lowering power costs, Beijing hopes to keep AI projects inside China even as U.S. export rules limit access to advanced chips.
China’s Provinces Compete for AI Investments
Local governments are now racing to attract more data centers, offering cash support and cheaper power. In some areas, these subsidies can cover up to a year of operating costs, according to reports.
Electricity prices in these inland provinces are already about 30% cheaper than in coastal cities. With the new discounts, rates could fall to RMB 0.4 (5.6 cents) per kWh, compared with about 9.1 cents per kWh in the United States, based on data from the U.S. Energy Information Administration.
Local Chips Still Trail Nvidia for Now
Chinese chipmakers still lag behind Nvidia in performance and efficiency but are closing the gap. For example, Huawei’s Ascend 910C chip links several chips together to match Nvidia’s computing power, though this raises energy use.
Still, by offering cheaper and greener power, China aims to make local chips more viable and reduce Nvidia’s dominance in its fast-growing AI market.
Is Nvidia Still a Good Stock to Buy?
On TipRanks, NVDA stock has a Strong Buy consensus rating based on 37 Buys, one Hold, and one Sell rating. The average Nvidia price target of $237.86 implies 15% upside potential from current levels. Year-to-date, NVDA stock has surged nearly 54%.
