NVIDIA and the Trade War between the USA and China
NVIDIA, a leading manufacturer of graphics processors (GPUs), is heavily affected by the geopolitical tensions between the USA and China. Despite the ongoing boom in artificial intelligence (AI), the dependency on China poses a significant risk for the company.
Impact of Export Restrictions
- Market Share in China: Since 2022, NVIDIA’s market share in China has fallen from 95% to 50%, mainly due to the tightened export regulations.
- H20 Chip and Export Licenses: The US government has restricted the export of the H20 chip, specially developed for China, leading to a write-down of inventory worth $5.5 billion for NVIDIA.
- Security Concerns: The US government justifies these measures by citing security concerns, fearing that American high technology could be misused for military purposes.
Strategic Adjustments and Growth
Despite these challenges, NVIDIA has secured new contracts in Asia and other regions to minimize the risk from China:
- New Markets: NVIDIA has signed contracts in Southeast Asia and the Arab region, including for a large data center in the United Arab Emirates.
- Revenue Forecast: For the second quarter of 2025, NVIDIA forecasts a revenue of $45 billion, representing a growth of about 50% compared to the same period last year, despite the export restrictions.
AI Success Without China
Although NVIDIA is heavily impacted by China, the company demonstrates that it can also grow without this market:
- AI Boom: NVIDIA greatly benefits from the boom in the AI sector, driven by the construction of numerous data centers powered by NVIDIA GPUs.
- Diversification: By diversifying into new markets and regions, NVIDIA can reduce its dependence on China and continue to grow.
Overall, NVIDIA is capable of continuing its growth story even as geopolitical risks remain a challenge. The diversification into new markets and the strong position in the AI sector are critical factors for the company’s long-term success.