China Urges Tech Giants To Shift Away From Nvidia And Other Foreign Chip Makers, Boost Domestic AI Chip Purchases: Report
Portfolio Pulse from Benzinga Neuro
China has reportedly instructed its tech giants, including Alibaba, Baidu, ByteDance, and Tencent, to reduce their reliance on foreign-made chips like those from Nvidia and increase their purchase of domestic AI chips. This directive aims to balance the purchase of local and foreign AI chips for new data centers, posing a challenge for Nvidia, which counts China as a critical market, making up 19% of its data center chip revenue in fiscal year 2023. Despite U.S. export restrictions affecting revenue, Nvidia is developing three new GPUs for China. HSBC Global Research maintains a Buy rating on Nvidia, raising its 12-month price target.
May 14, 2024 | 9:34 am
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NEUTRAL IMPACT
Alibaba, as one of the tech giants, is advised to reduce reliance on foreign chips, including Nvidia's, which may impact its operations and procurement strategies.
While the directive impacts Alibaba's procurement strategy, the effect on its stock price is uncertain due to potential benefits from domestic chip sourcing.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEUTRAL IMPACT
Baidu is impacted by China's directive to reduce reliance on foreign chips, potentially affecting its procurement strategy and reliance on Nvidia's chips.
Baidu may need to adjust its procurement strategy due to the directive, but the direct impact on its stock is uncertain, balancing potential costs and benefits.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEUTRAL IMPACT
Tencent is advised by the Chinese government to reduce its reliance on foreign chips, including those from Nvidia, which may influence its procurement decisions.
The directive impacts Tencent's chip procurement strategy, but the overall effect on its stock price is uncertain, depending on how it adapts to these changes.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEGATIVE IMPACT
Nvidia faces challenges in China as the government advises tech giants to reduce reliance on foreign chips, impacting a significant market for Nvidia.
China's directive for tech companies to reduce reliance on foreign chips like Nvidia's directly impacts Nvidia's market position and revenue in China, a critical market for the company.
CONFIDENCE 80
IMPORTANCE 85
RELEVANCE 90