While the Chinese market is largely off-limits to chip stocks of all stripes these days, there is still a bit of room left. And Nvidia (NVDA), one of the biggest names in chips around, is discovering that there’s life in the internal Chinese market, as it faces unexpected competition from Huawei. Despite this, Nvidia is up in a big way, with shares surging over 5% in Tuesday afternoon’s trading.
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According to the Wall Street Journal, Huawei is actually within striking distance of rolling out its own artificial intelligence (AI) chip specifically geared toward the Chinese market. Known as the Ascend 910C, it is said to be on par with the H100 that Nvidia introduced last year but isn’t directly available in China.
Huawei has been working to break through into the AI chip market after the United States largely shut down operations therein, to the point where even non-U.S. firms were cutting off supply. But Huawei has had no shortage of support from the Chinese government, and has put those vast resources to work accordingly, developing the next generation of chips.
A Little Black-Market Help
However, the story of Huawei’s impressive progress in chip development is not completely above board, at least not according to reports from The New York Times. Last week, it detailed how there was a brisk Nvidia chip trade in China despite the United States sanctions therein. This was not because Nvidia was quietly supplying the chips but rather because they were being smuggled into the country in violation of the sanctions.
A stop at the SEG electronics market in Shenzhen revealed that Nvidia chips, despite the U.S.’ best efforts, were easier to come by than expected. One vendor revealed that chips could be ordered for delivery in just two weeks. Another, meanwhile, boasted of order sizes measuring 200 to 300 chips at a time, which apparently could be filled without incident. This likely made it easier for Huawei to reverse engineer a chip capable of competing with Nvidia.
Is Nvidia a Buy or Hold?
Turning to Wall Street, analysts have a Strong Buy consensus rating on NVDA stock based on 37 Buys and four Holds assigned in the past three months, as indicated by the graphic below. After a 161.96% rally in its share price over the past year, the average NVDA price target of $144.17 per share implies 25.11% upside potential.
