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Nvidia winning approval in August to sell its H2O chips (read: older, less impressive technology) to China turned out to be a hollow victory. Beijing barred government agencies from buying the H2O chips and pressured private-sector companies into doing the same, ostensibly due to fears that the U.S. had embedded backdoors in the chips for surveillance purposes. Whether those fears were sincere, nobody knows, but at the very least, they were a convenient pretext for Xi Jinping to push his country away from dependence on U.S. technology, particularly Nvidia’s.
That’s a dependence that Huang has spent more than a decade nurturing, even back when his company’s chips were mostly used for video games. It’s therefore unsurprising that he has been open about wanting U.S. approval to sell advanced AI Blackwell chips to China. Unfortunately for Nvidia, after President Trump met with Xi Jinping last week, there was no mention of such an agreement.
Huang’s desire is driven by more than just a superficial desire for even more revenues. After all, even without China, Nvidia cannot keep up with demand for its chips: the company sells them faster than they can be produced.
It’s widely agreed within the semiconductor industry that Nvidia’s dominance over competitors is not due to any significant superiority in the chips themselves. Instead, Nvidia’s biggest advantage is CUDA (Compute Unified Device Architecture), its own software ecosystem.
CUDA is Nvidia’s massive library of developer software, tools, and code that enables any company using Nvidia’s chips to more easily accomplish its objectives. It’s widely acknowledged to be far superior to AMD’s ROCm and Intel’s oneAPI ecosystems, largely because Nvidia’s was first on the scene and built on that head start by inviting developers to add to the library bit by bit over the years. Thus was a so-called virtuous cycle created: The more developers used CUDA, the more they improved it. The better CUDA got, the more developers used it. That’s why it has proven so difficult for competitors’ ecosystems to catch up. Convincing a CUDA AI developer to switch ecosystems is significantly harder than convincing an iPhone diehard to move to Android.
However, Nvidia and CUDA can only maintain this advantage as long as they can maintain dominance in mindshare amongst AI developers around the world. Cutting off the developers of various Chinese tech giants (Alibaba, Baidu, ByteDance) from access to CUDA means that they will no longer contribute to improving it. What’s worse, it effectively forces them to instead work with Huawei and its CANN ecosystem – and improve it. As George Chen, partner at The Asia Group, told the Financial Times, “As Chinese companies transition to Huawei’s AI chips, it will create a whole rival ecosystem supported by the company’s software and hardware.”
In the last week alone, Nvidia has directly announced AI chip deals with Samsung and Hyundai (after a widely photographed, market-boosting (!) meal of fried chicken); another deal with the U.S. Department of Energy, and deals with Palantir, Uber, Eli Lilly, and – as we wrote about last week, with Nokia. At the same time, other companies are inking deals with each other that primarily focus on Nvidia chips as well – just yesterday we saw deals between Amazon and OpenAI, and between Microsoft and Lambda, for instance. So Nvidia is not hurting for lack of business, and it seems unlikely this will change.
Small wonder that Huang projects confidence about Nvidia’s current position as top dog. Nvidia is “miles ahead” of Huawei, he assured reporters. However, “it is foolish to underestimate the might of China and the incredible, competitive spirit of Huawei.” Speaking to reporters in Beijing, he elaborated that “anyone who discounts Huawei and Chinese manufacturing capabilities is deeply naive,” he said. “It’s only a matter of time” before China ceases to need Nvidia.
Huang apparently believes that this time will come sooner rather than later if Nvidia is out of China for much longer.
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Q: Is there room for sustainable energy stocks to move upwards?
A: I think all power sources are needed, but BTUs are needed to generate the quickest and less expensive power sources. Bill Gates is buying old coal fired power plants to refit as a small nuclear plant, because the turn around time is faster than a new plant.
Catch up with FS Insight
We believe November will be an up month for stocks. The past 100 years show, after being up six months in a row, November is likely to gain +2.5%, or +200 points.
Technical
My thinking is that AMZN, GOOGL, TSLA, NVDA, and AAPL have combined to offer some great leadership despite the stalling out in most of the market in recent weeks. While the bifurcation between large-cap technology/discretionary and the broader market is growing more severe, I don’t see this as an issue, provided technology can continue pushing higher.
Crypto
ETH funding rates turning negative point to capitulatory posture, while BTC still shows positive funding, suggesting another potential flush cannot be ruled out.
News We’re Following
Breaking News
- Dick Cheney, driver of militant US response to 9/11, dies at 84 BBG
- Futures tumble after Wall St banks warn of market pullback, Palantir slides REU
Markets and economy
- London becomes ‘quant’ powerhouse as traders rake in revenues FT
- Wall Street intensifies scrutiny of fraud after spate of loan losses WSJ
- US looks to invest in rare-earth magnet maker in race with China BBG
Business
- Amazon inks $38 billion deal with OpenAI for Nvidia chips BBG
- Microsoft to invest over $15 billion in UAE, secures US export licenses for Nvidia chips REU
- Pfizer files second lawsuit against Novo Nordisk, Metsera in bidding war over obesity biotech CNBC
- First Brands sues founder Patrick James for fraudulent transfers BBG
Politics
- SNAP update: Trump admin will pay 50% of food stamp benefits in November amid shutdown CNBC
- Can Democrats mount a comeback? Look to Tuesday’s elections for clues POL
- For first time in long US government shutdown, hints of progress toward reopening REU
Overseas
- China sentences infamous Myanmar scam mafia members to death BBC
- Death toll from Typhoon Kalmaegi rises to four in the Philippines REU
- Medieval tower in Rome partially collapses, trapping worker who died after rescue efforts NYT
Of Interest
- Israel’s Holocaust Museum names 5 million victims, eyes AI for the others BBG
- Apple Watch data teamed with AI reveals heart damage FT
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| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 11/4 | 8:30 AM | Sep Aug Trade Balance | -64.129 | -78.311 |
| 11/4 | 10:00 AM | Sep JOLTS | 7130 | 7227 |
| 11/4 | 10:00 AM | Sep F Sep P Durable Gds Orders | n/a | 2.9 |
| 11/5 | 9:45 AM | Oct F Sep F S&P Srvcs PMI | 55.2 | 55.2 |
| 11/5 | 10:00 AM | Oct Sep ISM Srvcs PMI | 50.7 | 50 |
| 11/6 | 8:30 AM | 3Q P Nonfarm Productivity | 3.3 | 3.3 |
| 11/6 | 8:30 AM | 3Q P Unit Labor Costs | 0.95 | 1 |
| 11/7 | 8:30 AM | Oct AHE m/m | n/a | 0.3 |
| 11/7 | 8:30 AM | Oct Unemployment Rate | 4.4 | 4.3 |
| 11/7 | 8:30 AM | Oct Non-farm Payrolls | -25 | 22 |
| 11/7 | 10:00 AM | Nov P Oct P UMich 1yr Inf Exp | 4.6 | 4.6 |
| 11/7 | 10:00 AM | Nov P Oct P UMich Sentiment | 53 | 53.6 |
| 11/7 | 11:00 AM | Oct Sep NYFed 1yr Inf Exp | n/a | 3.38 |
