Chinese chip company Cambricon reported record profits for the first half of the year, which indicates that local alternatives to chipmaker Nvidia (NVDA) are gaining ground. Indeed, as China works to strengthen its domestic chip industry, Cambricon is one of several companies trying to replace U.S. tech giants. As a result, the company’s revenue jumped by over 4,000% year-over-year to 2.88 billion yuan (about $402.7 million), with a record net profit of 1.04 billion yuan. While these numbers are still small compared to Nvidia’s $44 billion in revenue last quarter, they show that momentum is growing.
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It is worth noting that earlier this year, the U.S. blocked Nvidia from selling its lower-powered H20 chip to China. Although Nvidia was later allowed to resume those sales, it now has to share 15% of its revenue from those chips with the U.S. government. China has also reportedly told local companies to avoid buying the H20 chip. This has led Chinese tech firms to use more domestic chips, like those from Cambricon, alongside whatever Nvidia chips they can still get.
It has also caused Cambricon’s Shanghai-listed stock to more than double this year to a market value of around $80 billion. The company said it’s also improving its software and building next-generation chips to compete more directly with Nvidia, whose strong ecosystem includes both hardware and developer-friendly software. Still, Cambricon and other Chinese chipmakers are far behind Nvidia in technology, and export restrictions are blocking China from accessing the world’s most advanced chipmaking tools. Therefore, it remains difficult for Chinese firms to fully compete on a global scale.
What Is a Good Price for NVDA?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 35 Buys, three Holds, and one Sell assigned in the past three months, as indicated by the graphic below. Furthermore, the average NVDA price target of $199.56 per share implies 9.8% upside potential.
