In its bid to create a domestic competitor to rival Nvidia Corporation NVDA in the artificial intelligence (AI) chip market, China is reportedly facing significant challenges due to U.S. sanctions and technological gaps.
What Happened: Chinese firms are ramping up efforts to develop an alternative to Nvidia’s chips, crucial for AI operations. This initiative is part of Beijing’s wider strategy to lessen its reliance on American technology. However, U.S. sanctions on China and Nvidia’s market dominance pose significant hurdles, CNBC reported on Thursday.
“Competing with Nvidia still presents substantial challenges in technological gaps, especially in general-purpose GPU. Matching Nvidia in the short-term is unlikely,” said Wei Sun, a senior analyst at Counterpoint Research.
Nvidia’s success is largely due to its server products, which contain graphics processing units (GPUs) that allow companies to train their AI models on extensive data. These AI models are vital for applications like chatbots and other emerging AI applications.
Since 2022, the U.S. government has curtailed the export of Nvidia’s most advanced chips to China, tightening restrictions last year. These semiconductors are crucial for China’s ambition to become a leading AI player.
Several Chinese contenders, including tech giants Huawei, Alibaba Group Holding Ltd BABA, Baidu Inc BIDU, and startups like Biren Technology and Enflame, are aiming to challenge Nvidia. However, these companies are currently trailing Nvidia.
U.S. sanctions and their subsequent impacts are the most significant hurdles to China’s ambitions. Some of China’s leading Nvidia challengers have been placed on the U.S. Entity List, restricting their access to American technology. Additionally, several U.S. restrictions have prevented key AI-related semiconductors and machinery from being exported to China.
Chinese GPU players design chips and rely on a manufacturing company for production. Previously, Taiwan Semiconductor Manufacturing Co. (TSMC) would have been the go-to, but U.S. restrictions mean many of these firms cannot access TSMC-made chips. As a result, they have to turn to SMIC, China’s largest chipmaker, whose technology is generations behind TSMC.
Despite these challenges, Chinese startups remain hopeful, seeking to raise funds to achieve their objectives.
Why It Matters: Despite U.S. sanctions, Chinese tech giants have increased their capital expenditure in 2024, focusing on AI infrastructure. Furthermore, Nvidia’s AI chips are still finding their way into Chinese markets via smuggling, indicating the country’s continued investment in AI.
Meanwhile, China’s Yangtze Memory Technologies Co has made significant strides in substituting foreign chipmaking technology with domestic alternatives. These developments highlight China’s persistent efforts to become a leading player in the global AI market, despite the challenges.
Read Next:
Image via Shutterstock
This story was generated using Benzinga Neuro and edited by Pooja Rajkumari
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
