As the US continues to navigate an AI trade war with China, some startling revelations have raised questions about the effectiveness of its semiconductor export controls. According to a report published by The Information, ByteDance is planning to spend as much as $7 billion on buying Nvidia chips in 2025. The US government is yet to react to this revelation, but there’s a good chance they won’t be happy with the Chinese firm’s plans.
Since 2022, the United States has placed export restrictions on many advanced semiconductor chips, including Nvidia’s Blackwell predecessor, the Hopper GPUs. Nvidia has circumvented this ban by creating a variant of the H100 GPU called the H800 GPU. This was essentially a dumbed-down version of the most powerful GPU available at the time. Nvidia achieved this by restricting the bandwidth, resulting in reduced communication speed between the GPUs. This helped them comply with export regulations at the time.
Chinese companies were happy to receive the H800s. However, they also figured out a new way to get access to Nvidia’s latest chips. If they built a data center in any of their neighboring countries and imported the Nvidia chips there, they could circumvent the export ban. That’s what ByteDance plans to do as well.
For context, ByteDance is the owner of Doubao, the most-used AI chatbot in China with 51 million users. The company plans to continue its domination and for that, it is willing to go to great lengths to get its hands on Nvidia’s latest GPUs.
So what does this mean for Nvidia? We already know that Nvidia’s China revenue has gone down from 25% of the total revenue to 15% over the last few years. But is it just a case of the missing revenue being diverted to other places and the products still ending up in China? After this development, that seems to be the likely case.
This would mean that no matter how China and the US settle their trade disputes, China will, one way or the other, get its hands on Nvidia GPUs. As both countries try to hurt each other financially, Nvidia can come out unscated, or even the winner!
Nvidia is 5th on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 193 hedge fund portfolios held NVDA at the end of the third quarter which was 179 in the previous quarter. While we acknowledge the potential of NVDA as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article was originally published at Insider Monkey.
Hedge Fund Resource Center