China did the unthinkable amid the race to dominate the artificial intelligence market. The country’s local officials blocked imports of Nvidia’s (NVDA) H200 AI chips. In response, H200 suppliers paused production.
Though this news is based on two people familiar with the matter, it challenges Nvidia’s dominance as the AI chip supplier to the world. The chip maker already won the U.S. approval for exports, paying 25% in export taxes. Advanced Micro Devices (AMD) is also subject to those taxes, even though Chinese AI firms prefer Nvidia’s products.
The block threatens to take away one million unit sales for Nvidia.
Last week, shares of Nvidia gained 74 basis points. The stock is up by 115% from its yearly low, compared to being 12.23% from its 52-week high.
Investors are not concerned about this setback. Taiwan Semiconductor (TSM) posted strong results and expects demand to continue to rise. TSM stock rose by 5.8% last week. In this group, Applied Materials (AMAT), KLA Corp. (KLAC), Seagate (STX), a storage supplier, and Arista (ANET) all performed well.
Investors sensed that AI spending would outpace SaaS investments. Last week, ServiceNow (NOW) lost 10%, Adobe Systems (ADBE) declined, and Workday (WDAY) declined. Salesforce (CRM) and Intuit (INTU) both fell by more than 10%.
The stock market’s bet against SaaS is irrational. AI spending will weaken if SaaS suppliers do not invest in AI to strengthen their product offerings.
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