Nvidia Faces Fierce Competition in China, Tencent and Huawei Lead the Charge

Zinger Key Points
  • Chinese firms like Tencent push AI chips as Nvidia alternatives amid U.S. export restrictions, eyeing market share.
  • Huawei, Tencent develop AI chips competing with Nvidia's, tapping into China's $7 billion AI market amid U.S. tech curbs.

Chinese chip designers, including Tencent Holdings Ltd TCEHY, actively promote their AI chips as alternatives to Nvidia Corp's NVDA products. They hope U.S. export restrictions will encourage clients to switch. 

Nvidia dominates up to 90% of China's $7 billion AI chip market. Still, recent U.S. technology controls have given an opening to smaller companies like Hygon Information Technology and startup Iluvatar CoreX to challenge Nvidia, Reuters reports.

Huawei Technologies is making significant progress with its Ascend 910B chip, comparable in computing power to Nvidia's A100. 

Tencent, known for its social media and gaming dominance, is leveraging its AI inference chip Zixiao, developed with Enflame, to offer performance similar to some Nvidia chips. 

Tencent is proposing its Zixiao v1 as a cost-effective alternative for Nvidia's A10 and is developing a v2Pro variant for AI training to replace Nvidia's restricted L40S chip.

Tencent uses the Zixiao chips internally and offers computing power through its cloud services, including Nvidia and Advanced Micro Devices, Inc AMD options

Tencent-backed Enflame and Iluvatar CoreX also market their AI training accelerator chips as substitutes for Nvidia's advanced A100 chip. Hygon is promoting its new GPU, Shensuan No. 2, as compatible with Nvidia's CUDA platform, allowing easy switching for Nvidia users.

Furthermore, Intellifusion announced its Deepedge10 chip to compete with Nvidia's H20, which complied with export curbs and was likely to take advantage of Nvidia's situation. 

These developments come as Chinese technology firms, including Tencent and Baidu Inc BIDU, seek domestic sources for AI training chips due to U.S. restrictions. 

However, production capacity remains challenging for these emerging Chinese chipmakers due to U.S. curbs on foundries like Taiwan Semiconductor Manufacturing Company Ltd TSM working with Chinese firms. Despite these limitations, the market opportunity is growing as tech giants prioritize diversifying their AI chip sources beyond Nvidia's offerings.

Price Action: NVDA shares traded higher by 0.46% at $477.26 premarket on the last check Monday.

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