NVIDIA’s Jensen Huang: Sino-US chip dispute may cause “huge damage” to the US technology industry

Recently, Jensen Huang, CEO of the American graphics chip giant Nvidia, said in an exclusive interview with the Financial Times that the chip dispute between China and the United States may cause "huge damage" to the U.S. technology industry.

Jen-Hsun Huang told the Financial Times that the Biden administration has imposed strict U.S. export controls to slow down semiconductor manufacturing in mainland China, causing Nvidia's "hands to be tied behind its back." He said that Chinese companies have begun self-research to compete with Nvidia's graphics, gaming and artificial intelligence processors.

Huang Renxun also said that mainland China accounts for about one-third of the U.S. technology industry market and is impossible to replace.

According to a recent report by the foreign media "Wccftech", the price of the chips provided by Nvidia to China is 40% higher than the original recommended selling price. China's current huge demand for these AI GPUs makes the price of the V100 launched by Huida in 2018 still high. No less, about 69,000 yuan, while the NVIDIA A800 is priced at about 252,000 yuan.

The report mentioned that in addition to the increase in the price of Nvidia chips, the delivery cycle has also been affected. Nvidia hopes to meet the needs of non-Chinese technology partners first. The delivery time of Nvidia GPUs in China has been lengthened from the original 3 months. It is reported that Some new orders may not be delivered until December, requiring more than half a year to wait.

As for the alternative version that cuts off part of the transmission rate, can it meet China's chip demand? A senior executive of a Chinese chip design company believes that although the current impact is limited, the demand for computing power in the technology industry is growing rapidly and may face challenges in the future.

NVIDIA’s growth rate exceeds 100% this year

Reuters reported last week that shares of Nvdia Corp, Advanced Micro Devices and Micron Technology were among the biggest boosts to the chip industry, which outperformed the broader market as investors sought ways to invest in artificial intelligence and Japan.

Among them, NVIDIA's stock price rose 5.0%, while the Philadelphia Semiconductor Index rose 3.2%. Data show that so far in 2023, Nvidia stock has risen 116%, hitting its highest point since December 2021, while the S&P 500 Technology Index, which lags behind the chip sector, has risen 2.1%, and the S&P 500 Growth Index has slowed down. to 1.0%.

NVIDIA is encouraged by analysts' optimistic performance in next week's financial report and the company's release of its latest gaming graphics cards, and its stock price is approaching its highest historical peak in 2021.

Barron's, MarketWatch, The Motley Fool and other foreign news reports, Susquehanna analyst Christopher Rolland issued a research report stating that the "artificial intelligence (AI) gold rush" continues to spread, and Nvidia is expected to deliver excellent results when it announces its financial report next week, and its outlook is also optimistic. Look pretty. He and Oppenheimer analyst Rick Schafer simultaneously revised Nvidia's target price to $350 from $310 and $300 respectively.

Both Schafer and Rolland believe that as AI tools continue to develop, the demand for Nvidia's graphics processors (GPUs) designed specifically for AI will also increase. This means that Nvidia's first-quarter revenue and earnings should be able to beat Wall Street expectations, and even raise its financial forecast, thereby encouraging the stock price to continue to rise.

Truist analyst William Stein pointed out that component manufacturers in Nvidia's supply chain recently revealed that demand for AI GPUs is showing signs of heating up.

Nvidia also announced on the 18th that the GeForce RTX 4060 Ti 8GB gaming graphics card using the "Ada Lovelace" architecture is scheduled to be launched on May 24, with a recommended price of US$399. The GeForce RTX 4060 Ti 16GB version will be released in July, with a suggested selling price starting at US$499. The entry-level GeForce RTX 4060 starts at $299 and will also be released in July.

NVIDIA said that with the powerful support of AI, the latest graphics card has "twice the horsepower of the latest game consoles"; "Deep Learning Super-Sampling" (DLSS) 3 technology will reduce CPU performance limitations. These graphics cards will also feature third-generation "ray tracing" technology.

After hearing the news on May 18, NVIDIA surged 4.97% to close at $316.78, setting a new closing high since December 8, 2021, almost approaching the historical closing high ($333.76) written on November 29, 2021, ranking first among Philadelphia Semiconductors It ranks first among the 30 constituent stocks in the index. Year to date, Nvidia's stock price has soared 116.76%.

It's not cheap either - it trades at nearly 60 times forward 12-month earnings, beating the average price-to-earnings ratio of 39.3 times.

This year, artificial intelligence has made a splash in the tech world as more companies join the race for dominance after the release of OpenAI’s conversational robot ChatGPT late last year. Nvidia has been trying to be a one-stop solution provider, offering chips that can help train these AI products on large amounts of text, images and videos, which requires massive computing power.

Stein said his ongoing conversations with component suppliers in Nvidia's supply chain have recently revealed rising demand for AI GPUs. He has maintained a buy rating on the stock since mid-2020, like Oppenheimer's Schafer.

"In short, we expect great things from DC [Data Center AI GPUs]," said Rolland, who has rated the stock a positive or buy for the past three years. The data center segment accounts for 60% of Nvidia's revenue. Wall Street consensus is for Nvidia to report earnings per share of 92 cents in the fiscal first quarter ended in April, according to FactSet data. Revenue is expected to be $6.53 billion.

It is worth noting that Barron's pointed out that Nvidia's price-to-earnings ratio calculated on the next 12 months' estimated earnings per share is now close to 60 times, far exceeding the historical average of 39.3 times. Nvidia is scheduled to release its earnings report after the market closes next Wednesday (24th).

Becoming a semiconductor leader

South Korean media reported that the market value rankings of major semiconductor manufacturers have changed several times in the past five years. The top two semiconductor companies, South Korea's Samsung and Intel, have recently fallen in the rankings. GPU manufacturer NVIDIA has taken the leading position, and TSMC has once again surpassed Samsung and won the second place.

Data from the South Korean Stock Exchange and the U.S. stock market show that as of May 19, NVIDIA was the world's largest semiconductor company with a market capitalization of US$773.2 billion. NVIDIA's market capitalization in 2018 was US$81.4 billion, ranking sixth among global semiconductor stocks. This time it took the top spot, a staggering improvement, and also expanded the gap between NVIDIA and second-place TSMC's market capitalization of US$481 billion by more than 60%.

Korean Star, which won the global semiconductor market value leader in 2018, had a market value of only US$341.3 billion in mid-May, ranking third behind NVIDIA and TSMC. Although Samsung's market value has grown from US$230.3 billion in 2018, it is not as fast as NVIDIA and TSMC. Intel, which ranked second in 2018, has fallen to eighth place with a current market value of US$124.8 billion. Although most semiconductor companies have grown in market value over the past five years, Intel has dropped by 41%.

SK Hynix, which ranked ninth in 2018, fell out of the top ten to 17th, with a market value of US$55.7 billion. Micron has a market value of US$74.6 billion, falling from 10th place in 2018 to 13th place. From the analysis of the market capitalization performance of memory companies, the operations of memory companies in the traditional cyclical industry have stagnated due to the decline in unit prices of DRAM and NAND Flash memory and customers' inventory adjustments due to the economic slowdown.

Finally, the market value of non-memory semiconductor companies such as foundries and fabless IC design companies has soared, with most of these companies becoming the semiconductor stocks with the highest market capitalization. In addition to NVIDIA and TSMC, Broadcom with a market value of US$284.4 billion, AMD with a market value of US$170.4 billion, Texas Instruments with a market value of US$124.8 billion, and Qualcomm with a market value of US$117.9 billion are all such companies. In particular, AMD's market value has increased by 9 times in the past five years.