Report China Bans Procurement of NVIDIA's H20 AI Chips
A much-discussed investment note allegedly published by Jefferies states that the Chinese authorities are banning the procurement of NVIDIA H20 AI GPUs. If confirmed, this step would represent a shocking escalation in the already damaged trade relationship surrounding high-tech components between the US and China.
Details from Jefferies Investment Note
According to the note shared online, the confirmed ban forbids China from buying the H20 and other "downgraded US AI chips" until further notice. In the event this report is found to be credible, the implication of the ban is that Chinese entities are now prohibited from placing new orders with NVIDIA for these products. This alleged ban constitutes a more serious measure than previous government directions, which merely required computing centers linked to the state to utilize a minimum of 50% domestic AI chips.
Supply Chain Checks Corroborate Report
The letter from Jefferies says its industry checks in Taiwan are in line with the reported ban. Those checks have indicated that NVIDIA has suspended all packaging and server work for the H20 chip, also "until further notice". This indicates a stall in the supply chain in light of the alleged procurement ban.
Potential Impact on NVIDIA
Jefferies concludes that as a result of these developments, NVIDIA will be unable to generate any AI chip revenue from China. The report further speculates that this situation will likely remain until the US and China reach a new trade agreement.
As it happens, the timing is crucial for NVIDIA because the company is right now in its pre-earnings quiet period during which it cannot speak publicly. This void of an official comment could provide a platform to short-sellers targeting the company's stocks based upon likely weakness from the possible loss of the Chinese market.
