Orders for Nvidia’s H20 Chip Surge as Chinese Companies Embrace DeepSeek’s AI Models
Surge in Demand for Nvidia’s H20 Chip in China
Introduction
Recent developments show that Chinese companies are significantly increasing their orders for Nvidia’s H20 artificial intelligence (AI) chip. This upturn is primarily driven by the rising demand for DeepSeek’s affordable AI models. Industry insiders have noted that this trend underscores Nvidia’s strong presence in the market while alleviating concerns regarding a potential decline in AI chip demand.
Major Players and Increased Orders
Tech giants such as Tencent, Alibaba, and ByteDance have ramped up their purchase of the H20 chip, which has been specifically designed for the Chinese market owing to U.S. export restrictions. This increase in orders has surged since DeepSeek gained recognition internationally last month.
These companies are not just using the chips for their own advanced AI systems; they also offer cloud computing services, allowing other firms to access their AI tools. This expansion means a wider range of businesses, including smaller firms in sectors like healthcare and education, are now acquiring AI-capable servers equipped with DeepSeek models and Nvidia’s H20 chips. Previously, such technology was largely restricted to high-budget sectors like finance and telecommunications.
U.S. Export Restrictions and Market Concerns
The situation is complicated by the U.S. government looking into potential restrictions on the sale of the H20 chip to China. Despite these uncertainties, insiders pointed to DeepSeek’s software as the primary reason behind the increase in demand for Nvidia’s AI chips.
Nvidia has not disclosed the exact figures for H20 demand in China, but they have emphasized that their products succeed in the market based on their performance in a competitive landscape. The company is expected to share its quarterly earnings soon, which may shed light on these trends.
Technical Advantages of DeepSeek
DeepSeek’s Artificial Intelligence models have proven to be competitive with Western systems while offering them at a lower cost. The models excel in "inference," meaning they generate specific conclusions efficiently instead of solely depending on raw processing power. Nori Chiou, an investment director at White Oak Capital Partners in Singapore, commented that the debut of DeepSeek sparked misconceptions about a potential decrease in computing power demand. Instead, the advancement of AI models has led to an increased need for deeper integration of AI technologies into various aspects of daily life.
Market Fluctuations Following DeepSeek’s Rise
The surge in AI stock values, initiated by DeepSeek’s entrance into the market, caused Nvidia’s shares to plummet temporarily. They were reported to have lost up to 20% of their value but have since recovered significantly. Currently, Nvidia shares have only dipped about 3% year to date, indicating resilience amid market volatility.
Implications for the Chinese Chip Market
The growing utilization of DeepSeek AI models is likely to benefit domestic chipmakers like Huawei, enabling them to compete more effectively within the Chinese market. Nonetheless, Nvidia’s H20 chip remains the benchmark in the industry despite the competition.
Nvidia’s Capacity and Revenue Prospects
Analysts suggest that Nvidia is expected to ship about 1 million H20 units in 2024, potentially generating over $12 billion in revenue. The H20 is the only chip that Nvidia is legally allowed to sell in China, having been launched in the aftermath of the latest U.S. export restrictions that began in October 2023. These restrictions have limited the export of Nvidia’s most advanced chips to China since 2022, as U.S. authorities express concerns regarding their applications in enhancing China’s military capabilities.
Adoption of DeepSeek’s Technology
Several companies in China have already indicated plans to adopt DeepSeek’s models. For example, Tencent has announced that it will beta test the integration of these models into its widely used WeChat app. Additionally, Great Wall, an automaker, has started to incorporate DeepSeek’s models into its connected vehicle systems, showcasing the technology’s versatility and growing influence in various industries.
