China Targets Nvidia (NVDA)

Key Points

Video

Summary

24/7 Wall St. contributors Douglas A. McIntyre and Lee Jackson explore some recent developments pertaining to Nvidia and its ability to produce AI chips. The two also explore what impact this news might have on artificial intelligence as a whole as we move forward.

Transcript

[00:00:02] Doug McIntyre: So, I feel bad for the guys who run Nvidia. Jensen Wong — well, hold on. I don’t feel that bad for ’em. Oh, okay. Okay. Jensen Wong has over, you know, a hundred billion dollars. I feel bad this way – They think they have a China deal every four or five days. Every four or five days it changes. The most recent thing is, is that the antitrust authorities in China have now brought a case against Nvidia and have said that they’ve made a decision that it basically represents one of its businesses, represents a monopoly in China. It’s a business that they own. They bought. Maybe two, three years ago. That helps manage the efficiency of data centers, right? It is not a chip company, it’s a basically a Bolton. Right? But if you go back, at first, the government, US government said you can’t sell chips. It hurts us too much strategically. Right? No chips. Then as a matter of fact, Nvidia said in one of its, earnings reports that we should not count on any revenue from China. It’s like a year ago. Then what happens is, okay, well you can buy the dumb down chip, the H 20, the chip for idiots. Hmm. Okay. Great. Great, great, great.

[01:21:13] Lee Jackson: Okay. We can work with that.

[01:23:05] Doug McIntyre: Next – Howard Lutnick, who is a billionaire trader from Wall Street, who’s now our commerce secretary, makes a comment to the press that said, “It’s not our first best product. It’s not our second best product. It’s not our third best product. It’s our fourth best product. That’s what we’re giving the Chinese.” The Chinese said that they were insulted. And then they, they ran around China to all the tech companies and said, start to build your own product build. We want you to build your own product. We want our own AI chips. So that was the next wave is, is that you’re going to, if you’re Alibaba, you’re gonna be buying a Chinese made AI chip.

[02:05:05] Lee Jackson: Yeah. And who’s, is it Huawei that’s the big competitor?

[02:11:21] Doug McIntyre: Look, here’s the problem. Nobody knows how good those are except for the Chinese. And if they were really, really, really good, they would’ve told Nvidia to take a hike. So now Nvidia is back in this situation where they don’t know how good their China business is going to be. I suspect that since it’s not a charge that has to do with the core Nvidia chip business that it may not be, you know, like the sinking of the Titanic. It may not spill over into these other things. The president wants the deal to stay around because he’s, he’s collecting 15%. You know, the government gets 15% of every sale of Nvidia. So I think, you know, the Chinese and the Americans are in the middle of a chess match. You’ve got, uh, tariffs, you’ve got these things like Nvidia, you’ve got the TikTok transaction. So who knows what the Trump people are doing with the Chinese people and whether it ends up being one massive deal or do you end up with four or five medium sized deals.

[03:26:05] Lee Jackson: Yeah, it kind sort of carve out sort of deals. Yeah. I, I think you’re right. And you know, it’s kind of interesting at this juncture because I think the president is, is he’s been, you know, leaning on the world to get even. And you know, he, what he’s done is whether our viewers know it or not, I mean, we were charged outrageous tariffs constantly and we did not charge back. And so, what the president has done is absolutely the right thing to do, and maybe it’ll is helping to level the playing field out there so everybody can say, okay, okay, it’ll be 10% or 15% for everybody. Yeah, the, the, the, the sort of impact Nvidia and, and companies like that have on, on the overall economy is huge here. And, and the president wants to keep that rolling. And so, yeah, it, it’ll be interesting to see. And, and hey, and guess who stepped into this picture? There was AMD kind of in the corner trying to fight their way in. So is Broadcom. So now Broadcom is like, is that the next big player? Is that the next big one to, I mean, it’s had a great run as well, so it’ll be interesting to see how this all comes out in the wash.

[04:34:07] Doug McIntyre: Matter of fact, people should look at that stock if they think that, you know, Nvidia’s market share isn’t gonna go up, that they’re gonna be the guys with, problems in China, but for, for everybody who’s watching this have a look at Broadcom. It’s, it’s not on the radar for most people in the AI chip business, but I would look at it.

[04:55:07] Lee Jackson: Yeah, I think you should as well. It ain’t cheap and it’s, you know, but we’ve covered the stock for 15 years, you know, when it was 10 bucks. Before they changed their name, we, you know, we covered ’em and I think you’re right. I think Broadcom’s a good idea to look at and again, we’ve had such a huge run and we’re probably due for a little fall correction, so maybe just kinda, you know, put a little stock in there and the, and then see if you don’t get a little sell off to buy a little bit more.

[05:25:22] Lee Jackson: Got it.