What impact will being interviewed have on Nvidia?

On July 31st, a news shocked the technology and investment circles: the Cyberspace Administration of China, in accordance with the Cybersecurity Law, Data Security Law, and Personal Information Protection Law, held talks with Nvidia and demanded that they provide explanations and proof materials regarding the security risks of vulnerabilities and backdoors in the H20 chip. Once this news was spread, it quickly attracted widespread attention and discussion from all walks of life. So, what impact will this interview have on Nvidia?

From a direct perspective, Nvidia is facing the dilemma of hindered product sales. The H20 chip is a "special edition" AI chip customized by Nvidia for the Chinese market based on the previous generation Hopper architecture. Since its launch in the first quarter of 2024, with its relatively advanced performance and support for Nvidia's software ecosystem, it has become the target of rush buying by major Internet companies in China. However, if it is ultimately confirmed that the H20 chip poses a security risk during this interview, its sales in the Chinese market will inevitably suffer a heavy blow. The previously hoarded 700000 H20 chips, along with the newly added 300000 TSMC orders, may face the risk of unsold products. According to Bloomberg Intelligence analysts' calculations, if the relevant issues cannot be properly resolved, Nvidia may lose $14-18 billion in revenue this year, which will undoubtedly be a heavy blow to its financial statements.

In terms of reputation, Nvidia also faces severe challenges. NVIDIA has always been a leading enterprise in the global AI chip field, renowned for its technological strength and product quality. But the recent interview incident has raised doubts about the safety of its products. Even if Nvidia can prove that the chip does not pose a security risk in the future, this incident will still leave a shadow in the minds of customers. Especially for enterprise and institutional clients who have extremely high requirements for data security and network security, they may re-examine their partnership with Nvidia and seek more secure and reliable alternative solutions.

From the perspective of market competition, this interview has brought development opportunities for Chinese chip companies and also put greater competitive pressure on Nvidia. In recent years, China has been vigorously promoting the independent research and development of the chip industry and the process of domestic substitution. Although there is still a certain gap in performance between domestically produced AI chips and international giants such as Nvidia, the development speed is rapid. For example, the market share of Huawei's Ascend chip has skyrocketed from 5% to 23%, and the performance of the Ascend 910B chip is close to H20, with a training efficiency of 85% of the latter and a cost of only two-thirds; 360 and other companies have fully switched to domestic chips. If Nvidia mishandles the H20 chip issue, resulting in a decline in its market share in China, it will leave more market space for domestic chip companies and accelerate the process of replacing domestic chips. For Nvidia, this not only means facing more intense competition in the Chinese market, but with the continuous advancement of domestic chip technology, it may also face increasingly strong challenges from Chinese chip companies in the global market in the future.

At the international relations and policy level, Nvidia is caught in a dilemma. The United States has long been pressuring chip companies to cooperate with technology monitoring, and the Nvidia H20 chip is a product that emerged from the difficult balance between US policies and the huge market demand in China. On the one hand, Nvidia needs to comply with relevant regulations and policy requirements in the United States; On the other hand, China is an important market for it, and losing the Chinese market will have a huge impact on its performance. This interview incident highlights Nvidia's strategic dilemma between China and the United States. How to meet US regulatory requirements while complying with Chinese safety regulations and continue to operate in the Chinese market is an urgent problem that Nvidia needs to solve. If a proper solution cannot be found, Nvidia may be forced to make difficult choices between the Chinese and American markets, and whichever side is chosen will have a profound impact on its future development.

The impact of the interview incident on Nvidia is comprehensive and far-reaching. This is not only related to its short-term financial performance and market share, but also to its long-term development strategy and global competitiveness. For Nvidia, how to properly respond to this crisis, resolve security risk doubts, and regain customer trust will be a major challenge it faces in the coming period. For the global chip industry landscape and the technological game between China and the United States, this event may also become an important turning point that deserves continued attention.