NVIDIA is feeling the squeeze by the US government sanctions aimed at stifling China’s progression in the AI race, which the chip manufacturer has responded to by slashing prices to beat the local Chinese competition.
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The GPU manufacturer is attempting to make high-end products for the lucrative Chinese market that accounts for approximately 17% to its revenue for fiscal 2024., but it must now work within the strict US restrictions that ban the exportation of powerful chips that will likely be used to train AI models. NVIDIA plans to still release new GPUs in China, but these new models will have to be cutdown versions of new hardware that’s limited to a specific performance point.
Reports indicate that NVIDIA found some of its Chinese customers weren’t to thrilled about the new performance capped hardware, and would instead opt for domestically manufactured chips that are exponentially growing in presence. Reuters now reports NVIDIA has been forced to slash prices of some of its products to compete with new kits from Chinese technology giant Huawei.
“NVIDIA is walking a fine line and working on a balancing act between maintaining the Chinese market and navigating U.S. tensions,” said Hebe Chen, a market analyst at IG. “NVIDIA is definitely preparing for the worst in the long term.“
“Our data centre revenue in China is down significantly from the level prior to the imposition of the new export control restrictions in October,” said NVIDIA CFO Colette Kress during NVIDIA’s first quarter earnings on Wednesday. “We expect the market in China to remain very competitive going forward.“