Nvidia stock fell on Monday on media reports of China's growing ambitions in the artificial intelligence chip space.
A Wall Street Journal report said Chinese chip designer Huawei Technologies is preparing to test its newest and most powerful AI processor, called the Ascend 910D. Huawei is slated to receive its first batch of the new chips as soon as late May from contract manufacturer Semiconductor Manufacturing International, known as SMIC, the report said.
Huawei hopes its latest AI processor will be more powerful than Nvidia's H100, which was released in late 2022. Nvidia has released three generations of graphics processing units since the H100.
Huawei managed to develop the Ascend 910D chip despite U.S. sanctions on technology trade with China. Previous versions are called 910B and 910C.
A Reuters report last week said Huawei claimed its 910C chip has performance comparable to Nvidia's H100. However, the Journal report disputes that claim.
Earlier this month, the U.S. government effectively barred Nvidia from selling AI chips to China, including its throttled processor called the H20.
Meanwhile, China is seeking to become self-sufficient in semiconductor technology.
Nvidia Stock Retreats
On the stock market today, Nvidia stock dropped 2.1% to close at 108.73. Year to date, Nvidia stock is down 19%.
Wall Street analysts are skeptical that Huawei can catch up with Nvidia without access to the latest semiconductor manufacturing equipment from the likes of ASML.
"The difficulty we see for Huawei is that it remains tied to SMIC's 7-nanometer process," Wedbush Securities analyst Matt Bryson said in a client note Monday. "While chip design, software, and system design can resolve limitations and/or increase AI productivity (as illustrated for instance by Groq's initial success with inference, DeepSeek, and Nvidia's NVL-72), it also is difficult to offset the advantages of node shrinks, particularly when they compound over several generations."
Still, Huawei's advances are important and could position the company to compete with Nvidia outside of China, particularly in markets where the U.S. limits AI shipments, Bryson said.
Bryson rates Nvidia stock as outperform with a price target of 175.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
