Uncle Sam Threatens Nvidia’s 90% Monopoly in the Chinese AI Chip Marketby@ashumerie
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531 reads

Uncle Sam Threatens Nvidia’s 90% Monopoly in the Chinese AI Chip Market

by Asher December 13th, 2023
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The AI boom in 2023 has propelled Nvidia to new heights with a $200 billion valuation, mainly due to its focus on AI over PC gaming. Nvidia holds an 80% global AI chip market monopoly, surging to 90% in China's $7 billion market. U.S. export restrictions on AI chips to China, initiated by Biden, are reshaping the landscape. While Nvidia initially downplayed the impact, Chinese firms like Huawei, Tencent, and Hygon are vying for the void, potentially challenging Nvidia's dominance.

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In the global tech ecosystem and beyond, 2023 has undoubtedly been “The Year of AI”.

Reports, speculations, and even conspiracy theories regarding generative AI's capabilities, potential, shortcomings, and risks have traversed the globe—from major media networks to your mother’s WhatsApp group.

This shiny, new (well, sort of)  technology has seen adoption grow so much that businesses of every scale have moved mountains to build AI tools or, at the very least, integrate them into their workflows and service offerings.

OpenAI, the poster child of the AI revolution, has enjoyed meteoric growth on the back of its golden goose, ChatGPT. However, the company’s success in the realm of AI has not been a solitary journey. Other companies, spurred by OpenAI’s “proof of concept,” have since sought after geese of their own.

With a valuation bump of $200 billion in May, since it shifted the main focus of its graphic cards from PC gaming to AI, it’s clear that Nvidia has had one of the picks of the golden gaggle.

Already the most valuable chip maker in the world before the AI boom, Nvidia’s value and monopoly have unsurprisingly continued to grow steadily throughout the year.

Adding context, the company reported third-quarter earnings of $18.12 billion, marking a remarkable 206% increase from a year ago and a substantial 34% growth from the previous quarter. Further, it commands an 80% monopoly in the global AI chip market, soaring even higher to 90% in China's $7 billion market—a dominance that Biden's technology controls could potentially disrupt.

In October, the U.S. government set plans in motion to halt shipments to China of more advanced AI chips designed by companies like Nvidia to prevent Beijing from receiving cutting-edge U.S. technologies that could strengthen its military.

Even though most consumer chips, as can be found in laptops, smartphones, and gaming PCs, were effectively exempt from these rules, the Calif-based chip maker suffered a 3.7% fall in share price after the announcement was made.

About two months after the October 16 announcement, Nvidia is starting to feel the impact of Biden’s export restrictions as Chinese chip designers like Tencent holdings, State-backed Hygon, and startup Iluvatar CoreX make a play for the market leader’s freshly vacant throne.

However, as Reuter reports, Huawei seems closest to the crown, with its Ascend 910 holding its own against Nvidia’s A100 in terms of computing power.

In a Biden-sponsored free-for-all, Tencent - China’s largest social media and gaming firm - and other Chinese-based companies are marketing their chips as holistic alternatives to Nvidia and not just for its advanced offerings.

Ironically, U.S. actions aimed at slowing down China's AI capabilities have unintentionally boosted China's self-development capability. However, Chip designers in the region might struggle to meet the demands of Chinese tech giants due to production capacity constraints—resulting from U.S. curbs on foundries working with Chinese firms.

When the new regulations were first introduced in October, Nvidia said it complies completely and does not expect significant near-term impact on results.

I wonder if they still maintain that position.

Nvidia finished at #31 on this week’s HackerNoon Tech Company Rankings

Nvidia TCNB Rank

👋 You’re reading part 1 of HackerNoon's Tech Company News Brief, a weekly collection of tech goodness that combines HackerNoon's proprietary data with internet trends to determine which companies are rising and falling in the public consciousness. Part 2 goes live tomorrow. Hate waiting? No problemo! Just subscribe here to receive the complete newsletter a day early in your inbox.

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-Asher Umerie, Editor, World News & Scifi @ HackerNoon.