Nvidia Faces New AI Chip Challenge As Huawei Gains Ground In China Despite US Sanctions

Nvidia Corp NVDA acknowledged Huawei Technologies’ rivalry despite U.S. sanctions on the Chinese telecom company.

On Wednesday, in its annual report on chips, cloud services, computing processing, and networking products, Nvidia detailed Huawei among its peers.

Nvidia CEO Jensen Huang told CNBC about Huawei’s rivalry in China.

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Since 2019, the U.S. has restricted Huawei’s access to technology, citing national security threats. Huawei’s revenue topped 860 billion yuan ($118.27 billion) in 2024, up 22%.

The Chinese telecom company released its Mate 60 Pro in 2023. Just over a year later, Huawei launched the Mate 70 smartphone series, which uses its first fully self-developed operating system, HarmonyOS NEXT.

Huawei reportedly doubled the AI chip production yield to 40%, making Ascend chips profitable for the first time. Beijing urged domestic firms to buy Huawei AI chips, challenging Nvidia’s market dominance in China.

Nvidia dominates the AI chip market as Huawei struggles to match CUDA’s efficiency.

Huawei targeted China’s AI chip market with Ascend processors for inference tasks, rivaling Nvidia’s dominance in AI training. Nvidia earned $12 billion in sales in China in 2024, selling twice as many AI chips as Huawei with its Ascend 910B.

Nvidia’s first-quarter guidance helped assure the Street of the continued AI frenzy despite Chinese AI start-up DeepSeek’s claims of developing AI models rivaling Western counterparts at a fraction of their cost.

CEO Jensen Huang expressed optimism to SCMP over its demand for Blackwell processors.

Nvidia expects first-quarter revenue of $43.00 billion, plus or minus 2%, above the analyst estimate of $41.78 billion. But it expects gross margin to sink to 71%, below the Wall Street estimate of 72.2%, due to the Blackwell ramp-up.

CFO Colette Kress expects Nvidia to return to the mid-70% gross margin range later in fiscal 2025 as it further increases production of its Blackwell chips, lowering costs. Kress also announced that the Stargate data center project would use Nvidia’s Spectrum X Ethernet for networking. 

Price Action: NVDA stock traded higher by 1.93% at $133.81 premarket at the last check on Thursday.

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