00:00 Speaker A
When Nvidia is making a pivot on its China strategy. The FT now reporting that the tech giant is stopping production of its eight H200 chips destined for the Chinese market. Instead, Nvidia plans to shift capacity to focus on making its next gen Vera Rubin hardware. Dan Howley, of course, is with me for the latest developments. Daniel, great to see you as always. So let’s talk about this. The report is Nvidia’s halting China-bound H200 output. So I will double barrel this. What is H200 first? Explain it for us. And why do you think Nvidia could be making this move?
00:46 Daniel Howley
So H200 is the hopper chip that they had. So H, hopper, pretty easy. Uh B200 is the original Blackwell chip, B300 Blackwell Ultra, you know, yada yada yada. Uh this was going to be the chip that was going to go to China, right? The US had said, you know, all right, you guys can can ship it, you know, we’ll take a little slice of the, you know, the pie when you you get the cash for it. Uh and and that’s how we’ll roll.
01:13 Daniel Howley
if China plays ball. And so so far, uh you know, we’ve we’ve seen reports of China saying to certain companies, uh Alibaba, uh what have you that yeah, go ahead, you can you can order them but in like limited quantities. We’ve seen reports of China uh saying nobody use it, use homegrown chips. Uh and so on Nvidia’s most recent earnings call, Jensen Wong, CEO had said, we’ve gotten no revenue from China. That’s just not happening. And when they did their outlook for the current quarter, they said, this outlook has no China revenue built into it either. We’re not expecting any. We don’t know what’s happening. So it seems as though at this point, they’re just kind of saying,
01:54 Daniel Howley
we’re not getting orders. We don’t we don’t know what’s going on. We have huge demand for Vera Reuben. Why are we just sitting here wondering if we’re going to get something or not when we have definitive orders, let’s just go ahead and start making those fly off the the uh I mean
02:12 Speaker A
Well, this is why I ask you, did you look at that and say potentially is this look sort of like a bull, if I’m an Nvidia investor, do I think actually this is this is a good sign because it is a Jensen saying, well, you know what, I’m I’m I’m shifting capacity. Forget the H200, man. I got this demand for my Vera Reuben, the new hot stuff. It’s it’s hot. It’s flying.
02:30 Daniel Howley
I think it’s I think it can be it can be two things, right? The first is, uh yeah, Vera Ruben demand is there. They’ve they’ve said several times that Vera Ruben demand is off the charts. Um as well as demand for prior generation chips. They’ve said that even chips that are six years older are getting love as well. Uh you know, Jensen’s thing about getting into China uh was or is the uh when you have an American chip in China, you allow that to thrive and then you have a country that’s dependent on a US
03:00 Daniel Howley
company. And so that allows all kind of boats to to rise, uh specifically US boats. That’s that’s the thinking there. Um but at this point, it seems as though this has just been so many starts and stops that maybe they’re they’re just saying, look,
03:19 Daniel Howley
We have outrageous demand, let’s just go fill it with what we have. You know, get get those lines going for Vera Rubin and we’ll be able to bring in a ton of cash on that that you don’t have to split with the government either. Not split, but you know, take a cut off of. I think it was 15% last time we had seen. Um And so that to me is is in my mind where this kind of strategy fits in and it makes sense. You have a company that has a product that’s highly highly desirable. Everybody who’s in AI is trying to get their hands on it. And if they
03:52 Daniel Howley
can, you know, great for them. So why not just start sending them off the line and you know, now you’ll have more to sell later. So I mean, it’s it does make sense.
04:00 Speaker A
What about this broader question about some folks say you shouldn’t be, since we’re talking about China and AI, some smart folks in the industry say, what are you doing selling your AI chips to China in the first place? Are you nuts? You don’t, you don’t sell your superpower to an adversary. On the flip side of the coin, folks say, Dan, if you keep these export controls in place,
04:22 Speaker A
you’re gonna actually unintentionally encourage the Chinese homegrown domestic players to really up their game. What do you come down on that?
04:31 Daniel Howley
It’s hard, right? Because so, uh people, smart people, Dario Amati, uh he’s the, you know, the head of Anthropic. He said that it’s the, I think he said it’s the equivalent of giving a nuke to to your adversary, right? Uh China’s an adversarial country. Uh it’s a nice phrase to not say enemy but not say best friend. Uh And so, you know, they uh the the US has said, look, we don’t wanna give you guys carte blanche to to, you know, get these chips.
04:47 Daniel Howley
We wanna, you know, make sure that things are good for for us. Uh And you’ve had some lawmakers say that yeah, we we we should do that. We shouldn’t allow our, you know, prized possession go over uh to China and potentially build out their AI so that then they can have that spread throughout their military, their their companies, and then put up a bigger challenge to the US. The flip side though, as you say is, okay, so they don’t have access to these chips.
05:01 Daniel Howley
Well, now you’re just going to go ahead and make them build out their own chips that could be just as compatible or just as capable eventually. Uh and then they there’s nothing that that would put a a a kind of governor on their ability to grow their AI because they’re no longer dependent on the US. And it’s it’s kind of similar to what happened uh with Huawei, right? You cut off Huawei uh from from chips from the likes of Qualcomm uh and and uh that kind of technology.
05:22 Daniel Howley
And then they went ahead and said, all right, we’ll just build our own chips now. And now they have competing chips. And so they they had a a a market that was dependent on a US chip, now, it doesn’t matter, right? And so they just went out and built those chips. Now, I’m not saying that, you know, it’s apples to oranges, they’re very different technologies, they’re very different purposes. So perhaps it’s it’s easier to build a a chip for a phone than a data center.
05:39 Daniel Howley
I would assume it is. Uh but, you know, that that’s kind of the the the back and forth between these two and it’s it’s honestly, you know, hard to say who’s right and who’s wrong. I think it depends very much on where you fall on national security and and how AI plays into this. You know, obviously, it it plays a major role. We’ve heard that the Trump administration is using uh Anthropic’s AI models in Iran right now and used it as well. So, you know, I mean it’s it it it’s clearly not a pie in the sky idea that AI
06:13 Daniel Howley
uh is being used for military purposes and and will be down the line. So I mean it it really comes down to where you fall.