Economy News – Follow-Up
Chinese firms have significantly increased their orders for artificial intelligence (AI) chips from Invidia, driven by the rising demand for affordable AI models associated with Deepseek.
This surge in demand underscores Invidia’s dominance in the AI sector and may alleviate concerns regarding potential demand declines for AI chips due to Deepseek’s expansion.
Reports indicate that leading technology companies in China, including Tencent, Alibaba, and ByteDance, have markedly ramped up their orders for H20 chips. These chips were specifically designed for the Chinese market in response to U.S. restrictions on exporting advanced AI technologies to China.
The shift in demand follows Deepseek’s recent emergence on the global stage, highlighting the growing influence of low-cost AI models in driving the consumption of dedicated chips.
Cloud Computing Services
In addition to addressing their internal needs for advanced AI chips, major Chinese technology firms are providing cloud computing services through Tencent, Alibaba, and ByteDance, enabling other companies to access AI tools.
According to a source from one of China’s leading server manufacturers, smaller entities in sectors such as healthcare and education are now investing in AI servers equipped with Deepseek models and H20 chips. This marks a significant shift from the previous scenario, where only financial institutions and major telecommunications companies could afford advanced AI servers.
The administration of U.S. President Trump is contemplating further restrictions on H20 chip sales to China. Although the looming potential of new restrictions might be contributing to the surge in demand, insiders confirm that the accelerated growth of Deepseek models remains the primary catalyst.
The source chose not to disclose the specifics of the order volume due to confidentiality constraints.
Invidia did not respond to inquiries about the demand levels for H20 chips from China but asserted that its products “excel in a competitive market.” The company plans to release its quarterly results on Wednesday.
Similarly, Tencent, ByteDance, and Alibaba did not respond to requests for comment.
Deepseek models are emerging as formidable competitors to Western systems, delivering comparable performance at significantly lower costs. This advantage stems from their focus on optimizing results, enhancing computational efficiency without relying solely on raw processing power.
“With the launch of Deepseek, there was a misconception that computing demand might slow or decline,” stated Nuri Cyu, an investment manager at White Oak Capital Partners in Singapore. “In reality, the most advanced AI models are driving deeper integration into daily life, which is leading to a substantial increase in computational needs on the extraction level.”
Global stock markets experienced considerable volatility following the introduction of Deepseek, with Invidia shares plummeting up to 20% in late January, though they have since recovered much of that decline, currently down 3% year-to-date.
H20 Chips from Invidia
While the widespread adoption of Deepseek models could enhance the competitive capabilities of Chinese firms like Huawei within the local market, Invidia’s H20 chip continues to set the benchmark for the AI industry in China.
Analysts predict that Invidia will ship approximately one million H20 units in 2024, generating revenues exceeding $12 billion.
The H20 chip is the main product that Invidia is allowed to sell in China, having been introduced after the latest U.S. export restrictions in October 2023. Washington has prohibited the export of Invidia’s most advanced chips to China since 2022, due to concerns regarding potential military applications of advanced technologies.
Numerous Chinese companies, including Tencent, have announced plans to integrate Deepseek models, with Tencent stating it will begin experimental tests to incorporate these models into the popular WeChat application, while Great Wall is integrating Deepseek into its smart vehicle systems.
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