Is there a different front in the trades disputes between China and the US? Is this about high tech dominance? China forces some tech companies to give up trade secrets when they want to manufacture in China. The US government is blocking sales of certain technologies to ZTE. China is blocking the sale of NXPI to Qualcomm. Is this really about technology capabilities and a country’s dominance in the use of technology? Might this affect NVDA? NVDA sells the most advanced products needed for AI. If this “high tech war” escalates further is NVDA at risk of losing some sales to China? China has publicized that it wants to be the leader in AI by 2030. China needs NVDA to achieve this. Therefore, China would never slap any tariffs on NVDA products; it needs access to NVDA products to meet its own stated goal. The only way NVDA would be affect is if the US decides to limit the sales of NVDA products to China. This would be a very serious step. Could it happen? Perhaps but I think it would mean a serious escalation which would not be positive for the overall global economy. I think it’s unlikely.
Now we also have fears of a smartphone slowdown. This is affecting stock prices of semiconductor companies. Has NVDA been caught in this downdraft? Is it justified? Perhaps this is in part the reason why NVDA stock has dropped in the past 2 days, but I think that linking NVDA to anything to do with smartphones is unjustified. NVDA mainly sells its products for gaming and datacenter with a little to need to render graphics. Even the future of automotive is not linked to phones.
So in summary I think the headlines that have chip companies down should not affect the valuation of NVDA.
Chris
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From the point of view of emerging or developing economies, IP transfer is important to prevent technological colonialism. China’s policies make perfect sense from their point of view. Preventing IP transfer makes perfect sense from the American point of view. Time to sit down at the bargaining table!
The current “trade wars” exist because the current administration does not want to give in easily – The Art of the Deal – that’s all. Some of you might remember when America gave in during the trade wars with Japan. East Asia likes monopolies, Chaebol in Korea, Keiretsu in Japan, the Ruling Party in China.
Korea:
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&…
http://asiancenturyinstitute.com/development/935-korea-the-c…
Japan:
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&…
https://www.smithsonianmag.com/innovation/how-eight-conglome…
These structures exist because the government supports, or at least condones them. It’s industrial policy – protectionism.
Denny Schlesinger
Written by a one time management consultant in a banana republic.
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Hi Chris
I think Nvidia has much bigger China issues than trade ‘wars’. My personal feeling is that trade wars might have some relevance with respect to commodity products like steel and aluminium, but no real relevance to tech products. I’m sure its relatively easy for Nvidia cards to make their way to anywhere. Thousands of tonnes of steel, not so much.
The Chinese Government has been very open about their desire to lead AI, and also very clear that relying on Western suppliers is not part of their strategy.
From my deep dive, I’ve seen: https://www.wired.com/story/china-challenges-nvidias-hold-on…
also: https://www.nanalyze.com/2018/01/chinese-ai-chip-makers-comp…
And Alibaba is looking to make their own chips: https://technode.com/2018/04/20/alibaba-npu/
I’m sure they’re happy to use Nvidia chips in the short term to improve on the software side, until their own chip manufacturing capabilities become sufficient. The question is… can Nvidia stay ahead technically, or will China chip design and manufacturing equal/surpass Nvidia at some point in the not too distant future?
Which is really a question about how wide you think Nvidia’s moat is.
cheers
Greg
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