Shares of Nvidia (NVDA -2.02%) were pulling back today as investors responded to a new threat facing the AI superstar.
Just weeks after the company disclosed a write-off of as much as $5.5 billion due to new rules preventing exports of its H20 chips that were specifically designed for China, Nvidia now appears to be facing new competition out of China as Chinese tech giant Huawei is reportedly set to launch a new AI chip.
As a result, Nvidia stock was down 2.6% as of 3:21 p.m. ET.
Image source: Getty Images.
Nvidia faces a new threat
The tech race between the U.S. and China continues to heat up as The Wall Street Journal reported on Monday that Huawei is aiming to test it new AI chip known as the Ascend 910D, which it hopes will be more powerful than Nvidia’s H100s, the prized graphics processing unit (GPU) that has driven the artificial intelligence (AI) revolution.
According to the report, Huawei plans to ship more than 800,000 of the new chips to customers, including state-owned telecoms and ByteDance, the parent of TikTok.
Is Nvidia at risk?
The U.S. and China are involved in something of a cold war as the federal government has restricted exports to China and put pressure on allies to do the same.
In turn, the U.S. is also seeking to restrict the use of China-owned technology, such as TikTok and DeepSeek in the country.
Given the relationship and the general perception of China, the reach of Huawei’s AI chip could be limited to just China. Meanwhile, Nvidia seems to be losing its China business following the Trump administration’s new restriction, so the threat from Huawei may be less than what it seems. However, there are concerns that a substantial percentage of Nvidia’s business comes from its chips being illegally smuggled into China.
It’s also worth remembering that Nvidia continues to improve its own technology.
At a price-to-earnings ratio of 37, the stock looks very reasonably valued. Taking advantage of the dip here should pay off over the long run.