Shares in semiconductor giant Nvidia (NVDA) were lower today after the Chinese government banned domestic firms from buyIng its chips.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Regulator Request
According to an article in the Financial Times, China’s internet regulator The Cyberspace Administration of China told companies including TikTok owner ByteDance and e-commerce giant Alibaba (BABA) to end their testing and orders of the new RTX 6000D.
This is Nvidia’s tailor-made chip for the Chinese sector and follows reports yesterday that the chip, to date, has seen tepid demand. It was reported that some major tech firms had opted not to place orders because the RTX6000D, designed mainly for AI inference tasks, is seen as expensive for what it does, and that they are also awaiting clarity on Nvidia H20 orders and the potential B30A chip.
Now, it appears, that there is another reason for the lukewarm reaction to the new chip.
It is understood that several companies were in the process of ordering tens of thousands of the RTX chip, and had even started testing and verification work with Nvidia’s server suppliers. However, after receiving the halt order from the internet regulator they told their suppliers to put down their tools.
AI Race
Nvidia, which has also suffered export controls of its H20 chip in China during the worst of the tariff trade dispute between the U.S. and China, appears to be suffering again in the race for AI supremacy between the world’s two biggest economic powers.
As can be seen below its Chinese revenues have certainly suffered in recent months.
The Chinese government wants to grow its own semiconductor industry and reduce its dependence on Nvidia and other U.S. suppliers. This is for political reasons but also economic given the trade tensions between the two nations.
The Chinese government believes that its domestic firms such as Huawei, Alibaba and Baidu (BIDU) are already making chips equal to or even exceeding Nvidia products. They are increasingly confident that there is also the quantity, not just the quality, to meet domestic demand without Nvidia.
“People had hopes of renewed Nvidia supply if the geopolitical situation improves,” a Chinese tech executive told the FT. “Now, it’s all hands on deck to build the domestic system.”
Is NVDA a Good Stock to Buy Now?
On TipRanks, NVDA has a Strong Buy consensus based on 36 Buy, 2 Hold and 1 Sell ratings. Its highest price target is $250. NVDA stock’s consensus price target is $211.11, implying a 20.72% upside.
