- Nvidia’s H20 chips are in high demand in China, thanks to DeepSeek’s AI breakthrough—indicating DeepSeek's more efficient AI model doesn’t mean lower chip demand. Despite initial market panic, investors now believe DeepSeek could fuel even greater demand for Nvidia’s chips and boost its market dominance.
Chinese companies are rushing to buy Nvidia's H20 AI chips, driven by a surge in demand for DeepSeek’s cost-efficient AI models, Reuters reported, citing multiple sources.
Major Chinese tech giants like Tencent, Alibaba, and ByteDance have significantly increased orders for Nvidia's H20 chip, which is designed specifically for China under U.S. export controls. The H20 chip is the most powerful of the three China-focused chips Nvidia has developed.
Analysts estimate Nvidia shipped approximately 1 million H20 chips in 2024, which brought in around $12 billion of the company’s annual revenue of $60.922 billion.
Smaller firms in healthcare and education in China have also adopted AI servers with DeepSeek models, showing a shift beyond just big corporations investing in AI. Despite concerns that DeepSeek's efficiency could lower chip demand, the surge in orders suggests the opposite—that more advanced AI models are driving greater computing needs.
The U.S. government is reportedly considering new restrictions on H20 sales to China, but sources say the boom in demand is mainly due to DeepSeek, not fear of regulations.
The boost in demand may reassure investors ahead of Nvidia’s upcoming earnings on Wednesday.
The company suffered a stock drop that wiped around $600 billion off its market value after DeepSeek launched its R1 AI model. The claim that DeepSeek built R1, which outperformed many of the leading U.S. AI models, using lower-capability, less expensive chips, caused investors to worry that Big Tech firms could scale back their demand for Nvidia’s more advanced offerings. As a result, the company’s stock price plummeted.
Jensen Huang has stated that the market’s response to DeepSeek was based on a misunderstanding.
In an interview with Nvidia partner DDN about its software platform, Infinia emphasized that future AI models will still rely on Nvidia’s computing power, especially when refining and improving their capabilities in post-training. The company’s stock has since recovered most of its losses.
Nvidia earnings call expectations: Anything less than exceptional ...
Nvidia has been one of the biggest success stories of the AI boom.
The chipmaker controls the dominant share of the AI chip market, and an unprecedented surge in demand across the tech sector has meant the company has continually outperformed analysts' expectations every quarter.
This success is a double-edged sword, as anything less than exceptional performance could cause Nvidia's stock to take a beating.
However, analysts are confident Nvidia will continue its winning streak and that DeepSeek's breakthrough will actually boost demand for Nvidia chips.
"DeepSeek, if anything, has accelerated demand for more companies heading down the AI paths in 2025 ... not the opposite, in our view, despite many tech bears coming out of hibernation mode with the DeepSeek Cinderella narrative," Wedbush's Dan Ives said in a note.
Alvin Nguyen, a senior analyst at Forrester, said that DeepSeek had established a new and lower base of performance for generative AI, allowing more organizations to experiment with it.
"This should not have an immediate impact on NVIDIA since demand for their GPUs exceeds their ability to supply," he told Fortune. "Long-term, this allows competitors like AMD and Intel to gain a foothold in the lower end of the AI infrastructure market."
