Despite its excellent economic results, the company is attacked on the stock market. The fault of Chinese advances, but also and above all to the future response that Washington is preparing following them.
On paper, everything is fine with Nvidia. On February 26, the company published excellent quarterly results, beating the expectations of Wall Street. Sales of the graphics cards have believed 78% from one year to the next, while its profits stood at $ 74.3 billion, up 130% over a year. Despite the efforts of competitors like AMD to make up for their delay and offer chips capable of competing with those of Nvidia for the training of advanced AI models, the specialist in graphics cards always has a solid lead, fruit both of its technological excellence and the solidity of its ecosystem, which allows developers to quickly adopt its GPUS at the service of many different use cases.
How, therefore, explain the difficulties that the company knows on the stock market? At the time of writing these lines, the title was sold at $ 114, compared to $ 140 in mid-February. The action of Nvidia first fell at the end of January, after the spectacular revelations of the young Chinese shoot Deepseek, who rebatted the cards in the field of AI and left doubt on the need for ever more powerful graphics cards. But the action of the company then rebounded, the expenses in the infrastructure of IA continuing to accelerate despite Deepseek. The action of Nvidia finally experienced a new fall from the end of February, erasing all the gains from the post-deepseek rebound.
The United States determined against China
More than to the advances of the young Chinese shoot, it is to the early reaction of the Trump administration to it that the recent setbacks of Nvidia at Wall Street are due. Despite its undeniable success, the company occupies an unenviable position, taken in vice between Chinese competition on the one hand and American policies aimed at stifling this competition on the other.
The United States has been feared for several years that China, which invest Billions of dollars in AI, do not come and challenge its domination over this technology. Washington has for this reason, several waves of restrictions aimed at depriving access to Chinese companies to the best of American technology, in order to slow down their progress. The Biden administration opened fire at the end of 2022, with first measures strongly limiting the export of the most advanced AI chips to China, as well as that of the equipment necessary for their manufacture. These measures were then gradually extended to neutralize the means adopted by China to circumvent sanctions, such as relying on a network of shadow suppliers or importing slightly less advanced, but sufficient to cause AI algorithms.
The Biden administration has managed to convince several allied countries to join the sanctions, including the Netherlands, which house the ASML nugget, the only company in the world to market the photolithography machines necessary to produce advanced microprocessors. Or Japan, which has several key companies in the value chain of semiconductors, such as Sony (IA chips), Advantest (flea test) and lasertech (quality control). Just before leaving power, Joe Biden pulled a final salvo, aimed at further reducing China’s options.
Is China important for Nvidia?
But China continues to show an impressive adaptability to circumvent sanctions. American authorities suspect Thus Deepseek to have illegally imported Nvidia chips falling under the penalty of sanctions to train his model. An investigation by the Wall Street Journal published on Sunday March 2, also demonstrates that Chinese companies are based on a nebula of small companies based in neighboring countries to import Blackwell fleas, the latest generation of Nvidia, however under the penalty of sanctions. Singapore would serve in particular as a springboard to discreetly enter Nvidia chips. Three people have just been put in prison by the city-state. They are suspected of having helped to break American sanctions.
So there is a safe bet for Donald Trump, in favor of a hard line vis-à-vis China and already at the origin of a New wave of customs tariffs Against the Middle Kingdom, seeks to react by strengthening the restrictions in turn, which could further limit Nvidia’s access to the huge Chinese market. However, the measures in place are already starting to have an impact on the growth of the Californian company. Following the publication of the latest quarterly results of his company, Jensen Huang said that China occupied a twice as important place in its turnover before the first retaliation measures compared to today: 20/25% at the time against 10/12% now.
Nvidia has for a time faced such a demand that the drop in exports to China could be offset by other markets. But this is less and less the case, according to Dylan Patel, analyst at Semianalysis, a firm specializing in flea research. “The whole question is whether Western demand can compensate for the closure of the Chinese market, and it seems that the response is no, as the drop in the price of the H100 processor proves. If Nvidia continues to increase its production objectives of the H20 and B20 fleas production (whose sale is authorized on the Chinese market, editor’s note)these products offer a lower margin than the H200 and B200 fleas, under regulation. “
However, the importance of the Chinese market for Nvidia should not be exaggerated, according to Antoine Chkaiban, analyst at NewStreetresearch, an intelligence firm. “The Data Centers Division of Nvidia currently achieves 15% of growth per quarter: even supposing that China disappears completely from its radars, it would therefore be enough by three months for it to be compensated. The expenses of the hyperscalers and the capacity of the latter to develop their own chips constitute larger strategic issues for the company.”
What answer from Trump?
On the Chinese side, Nvidia also faces growing competition from Huawei. If the latter’s fleas remain lower technology than Nvidia, it is progressing rapidly and benefits from significant support from Beijing which encourages Chinese companies to obtain from Huawei to limit dependence on Nvidia and the pressures that the American government can exercise by virtue.
The latest retaliatory measures adopted at the end of Joe Biden’s mandate being already substantial, Trump’s options for a new battery of sanctions are however relatively limited. The American president could prohibit Nvidia from exporting his less powerful chips to China. Alibaba, Tencent and Bytedance already seem to have anticipated such a decision, having largely increased their orders for H20 flea markets recently.
Another option would amount to accentuating the pressure on Nvidia so that they control more who are the end users of their chips. “We are talking about systems connected to the Internet. Just as it is possible to locate a smartphone connected to the network, it must be possible for Nvidia to see who really uses its chips. The company is for the time being to respect the anonymity of its customers, but the American authorities could put pressure on him in this regard,” speculates Antoine Chkaiban.