It was also frustratingly predictable from the moment the US started trying to limit the sales of the chips. America has slowed the speed of Chinese AI development by a tiny number of years, if that, in return for losing total domination of the GPU market.
That’s not to say I’m brave enough to short NVDA.
At least for me, Google has some real cachet and deserves kudos for not losing money selling Gemini services, at least I think it is plausible that they are already profitable, or soon will be. In the US, I get the impression that everyone else is burning money to get market share, but if I am wrong I would enjoy seeing evidence to the contrary. I suspect that Microsoft might be doing OK because of selling access to their infrastructure (just like Google).
A major reason Deepseek was so successful margins wise was because the team heavily understood Nvidia, CUDA, and Linux internals.
If you have an understanding of the intricacies of your custom ASIC's architecture, it's easier for you to solve perf issues, parallelize, and debug problems.
And then you can make up the cost by selling inference as a service.
> Amazon and I think Microsoft are also working on their own NVIDIA replacement chips
Not just them. I know of at least 4-5 other similar initiatives (some public like OpenAI's, another which is being contracted by a large nation, and a couple others which haven't been announced yet).
Contract ASIC and GPU design is booming, and Broadcom, Marvell, HPE, Nvidia, and others are cashing in on it.
A long time ago I worked as a contractor at Google, and that experience taught me that they don’t like things that don’t scale or are inefficient.
My opinion, the problems for NVIDIA will start when China ramp up internal chip manufacturing performance enough to be in same order of magnitude as TMSC.
Wont it be enough to just solder on a large amount of high bandwidth memory and produce these cards relatively cheaply?
Perf is important, but ime American MLEs are less likely to investigate GPU and OS internals to get maximum perf, and just throw money at the problem.
> solder on a large amount of high bandwidth memory and produce these cards relatively cheaply
HBM is somewhat limited in China as well. CXMT is around 3-4 years behind other HBM vendors.
That said, you don't need the latest and most performant GPUs if you can tune older GPUs and parallelize training at a large scale.
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IMO, Model training is an embarrassingly parallel problem, and a large enough cluster leveraging 1-2 generation older architectures that is heavily tuned should be able to provide similar performance to train models.
This is why I bemoan America's failures at OS internals and systems education. You have entire generations of "ML Engineers" and researchers in the US who don't know their way around CUDA or Infiniband optimization or the ins-and-outs of the Linux kernel.
They're just boffins who like math and using wrappers.
That said, I'd be cautious to trust a press release or secondhand report from CCTV, especially after the Kirin 9000 saga and SMIC.
But arguably, it doesn't matter - even if Alibaba's system isn't comparably performant to an H20, if it can be manufactured at scale without eating Nvidia's margins, it's good enough.
Cerebras get their chipped fabbed by them. I assume Eucyld will have their chips fabbed by them.
If there's orders, why would they prefer NVIDIA? Customer diversity is good, is it not?
I am a long time fan of Dave Sacks and the All In podcast ‘besties’ but now that he is ‘AI czar’ for our government it is interesting what he does not talk about. For example on a recent podcast he was pumping up AI as a long term solution to US economic woes, but a week before that podcast, a well known study was released that showed that 95% of new LLM/AI corporate projects were fails. Another thing that he swept under the rug was the recent Stanford study that 80% of US startups are saving money using less expensive Chinese (and Mistral, and Google Gemma??) models. When the Stanford study was released, I watched All In material for a few weeks, expecting David Sack’s take on the study. Not a word from him.
Apologies for this off-topic rant but I am really concerned how my country is spending resources on AI infrastructure. I think this is a massive bubble, but I am not sure how catastrophic the bubble will be.
The US is burning good will at an alarming rate, how long will countries keep paying a premium to be spied on by the US instead of China?
This country used to have congressional hearings on all kinds of matters from baseball to the Mafia. Tech collusion and insider knowledge is not getting investigated. The All-in podcast requires serious investigation, with question #1 being “how the fuck did you guys manage to influence the White House?”.
Other notes:
- Many of them are technically illiterate
- They will speak in business talk , you won’t find a hint of intimate technical knowledge
- The more you watch it, the more you realize that money absolutely buys a seat at the table:
https://bloximages.chicago2.vip.townnews.com/goskagit.com/co...
(^ Saved myself another thousand words)
I mean. I think some of us knew this. There's a lot of issues with AI, some psychological, some are risk adverse individuals who would love to save hours, weeks, months, maybe years of time with AI, but if AI screws up, its bad, really bad, legal hell bad, unless you have a model with a 100% success rate for the task, it wont be used in certain fields.
I think in the more creative fields its very useful, since hallucinations are okay, its when you try to get realistic / look reasonably realistic (in the case of cartoons) that it gets iffy. Even so though, who wants to pay the true cost of AI? There's a big uphill cost involved.
It reminds me a lot of crypto mining, mostly because you need an insane amount to invest into before you become profitable.
Their multiples don't seem sustainable so they are likely to fall at some point but when is tricky.
I'm open to considering the argument that banning exports of a thing creates a market incentive for the people impacted by the ban to build aa better and cheaper thing themselves, but I don't think it's as black and white as you say.
If the only ingredient needed to support massive innovation and cost cutting is banning exports, wouldn't we have tons of examples of that happening already - like in Russia or Korea or Cuba? Additionally, even if the sale of NVIDIA H100s weren't banned in China, doesn't China already have a massive incentive to throw resources behind creating competitive chips?
I actually don't really like export bans, generally, and certainly not long-term ones. But I think you (and many other people in the public) are overstating the direct connection between banning exports of a thing and the affected country generating a competing or better product quickly.
Lost months are lost exponentially and it becomes impossible to catch up. If this policy worked at all, let alone if it worked as you describe, this was a masterstroke of foreign policy.
This isn't merely my opinion, experts in this field feel superintelligence is at least possible, if not plausible. This is a massively successful policy is true, and, if it's not, little is lost. You've made a very strong case for it.
doing a lot of heavy lifting in your conjecture
2. CUDA has been a huge moat, but the incentives are incredibly strong for everybody except Nvidia to change that. The fact that it was an insurmountable moat five years ago in a $5B market does not mean it’s equally powerful in a $300B market.
3. AMD’s culture and core competencies are really not aligned to playing disruptor here. Nvidia is generally more agile and more experimental. It would have taken a serious pivot years ago for AMD to be the right company to compete.
See, Mojo, a new language to compile to other chips. https://www.modular.com/mojo
It's all about investment. If you are a random company you don't want to sink millions in figuring out how to use AMD so you apply the tried an true "no one gets fired for buying Nvidia".
If you are an authoritarian state with some level of control over domestic companies, that calculus does not exist. You can just ban Nvidia chips and force to learn how to use the new thing. By using the new thing an ecosystem gets built around it.
It's the beauty of centralized controlled in the face of free markets and I don't doubt that it will pay-off for them.
And NVIDIA will lose its dominance for the simple reason that the Chinese companies can serve the growing number of countries under US sanctions. I even suspect it won't be long before the US will try to sanction any allies that buy Chinese AI chips!
They are vendor locking industries, i don't think they'll loose their dominance, however, vendor locked companies will loose their competitiveness
Simple example being TikTok.
Its just a matter of time really.
I believe about 1000 S&P points down - to just above the trade war lows from April.
China shouldn't be buying H20s. Those are gimped 3 year old GPUs. If Nvidia is allowed to sell the latest and greatest in China, I think their revenue would jump massively.
China, admittedly full of smart and hard working people, then just wakes up one day an in a few years covers the entire gap, to within some small error?
How is this consistent? Either:
- The Chinese GPUs are not that good after all
- Nvidia doesn't have any magical secret sauce, and China could easily catch up
- Nvidia IP is real but Chinese people are so smart they can overcome decades of R&D advantage in just s few years
- It's all stolen IP
To be clear, my default guess isn't that it is stolen IP, rather I can't make sense of it. NVDA is valued near infinity, then China just turns around and produces their flagship product without too much sweat..?
No, that's not really why. It is because nobody else has their _ecosystem_; they have a lot of soft lock-in.
This isn’t just an nvidia thing. Why was Intel so dominant for decades? Largely not due to secret magic technology, but due to _ecosystem_. A PPC601 was substantially faster than a pentium, but of little use to you if your whole ecosystem was x86, say. Now nvidia’s ecosystem advantage isn’t as strong as Intel’s was, but it’s not nothing, either.
(Eventually, even Intel itself was unable to deal with this; Itanium failed miserably, largely due not to external competition but due to competition with the x86, though it did have other issues.)
It’s also notable that nvidia’s adventures in markets where someone _else_ has the ecosystem advantage have been less successful. In particular, see their attempts to break into mobile chip land; realistically, it was easier for most OEMs just to use Qualcomm.
They also weren't starting from scratch, they already had a domestic semiconductor ecosystem, but it was fragmented and not motivated. The US sanctions united them and gave them motivation.
Also "good" is a matter of perspective. For logic and AI chips they are not Nvidia level, yet. But they've achieved far more than what western commentators gave them credit for 4-5 years ago. And they're just getting started. Even after 6 years, what you're seeing is just the initial results of all that investment. From their perspective, not having Nvidia chips and ASML equipment and TSMC manufacturing is still painful. They're just not paralyzed, and use all that pain to keep developing.
With power chips they're competitive, maybe even ahead. They're very strong at GaN chip design and manufacturing.
Western observers keep getting surprised by China's results because they buy into stereotypes and simple stories too much ("China can't innovate and can only steal", "authoritarianism kills innovation","China is collapsing anyway", "everything is fake, they rely on smuggled chips lol" are just few popular tropes) instead of watching what China is actually doing. Anybody even casually paying attention to news and rumors from China instead of self-congratulating western reports about China could have seen this day coming. This attitude and the phenomenon of keep getting surprised is not limited to semiconductors.
However they've also got a fair amount of generality, anything you might want to do that involves huge amounts of matmuls and vector maths you can probably map to a GPU and do a half decent job of it. This is good for things like model research and exploration of training methods.
Once this is all developed you can cherry pick a few specific things to be good at and build your own GPU concentrating on making those specific things work well (such as inference and training on Transformer architectures) and catch up to Nvidia on those aspects even if you cannot beat or match a GPU on every possible task, however you don't care as you only want to do some specific things well.
This is still hard and model architectures and training approaches are continuously evolving. Simplify things too much and target some ultra specific things and you end up with some pretty useless hardware that won't allow you to develop next year's models, nor run this year's particularly well. You can just develop and run last year's models. So you need to hit a sweet spot between enough flexibility to keep up with developments but don't add so much you have to totally replicate what Nvidia have done.
Ultimately the 'secret sauce' is just years of development producing a very capable architecture that offers huge flexibility across differing workloads. You can short-cut that development by reducing flexibility or not caring your architecture is rubbish at certain things (hence no magical secret sauce). This is still hard and your first gen could suck quite a lot (hence not that good after all) but when you've got a strong desire for an alternative hardware source you can probably put up with a lot of short-term pain for the long-term pay off.
Are they as good as Nvidia? No. News reporters have a tendency to hype things up beyond reality. No surprises there.
Are they useless garbage? No.
Can the quality issues be overcome with time and R&D? Yes.
Is being "worse" a necessary interim step to become "good"? Yes.
Are they motivated to become "good"? Yes.
Do they have a market that is willing to wait for them to become "good"? Also yes. It used to be no, but the US created this market for them.
Also, comparing Chinese AI chips to Nvidia is a bit like comparing AWS with Azure. Overcoming compatibility problems is not trivial, you can't just lift and shift your workload to another public cloud, you are best off redesigning your entire infra for the capabilities of the target cloud.
https://www.theguardian.com/technology/2024/jan/02/asml-halt...
Also, they're working hard on replacing ASML DUV machines as well since the US is also sanctioning the higher end of DUV machines. Not to mention multiple parallel R&D tracks for EUV.
You also need to distinguish between design and manufacturing. A lot of Chinese chip news is about design. Lots of Chinese chip designers are not yet sanctioned, and fabricate through TSMC.
Chip design talent pool is important to have, although I find that news a bit boring. The real excitement comes from chip equipment manufacturers, and designers that have been banned from manufacturing with TSMC and need to collaborate with domestic manufacturers.
But that still seems like a huge step behind using EUV + advanced techniques.
Anyway, I'm curious to know how far that gets them in terms of #transistors per square mm.
Also, do we know there aren't secret contracts with TSMC?
It could also happen that all their DUV investment allows them to discover a valuable DUV-derived tech tree branch that the west hasn't discovered yet.
Results are at least good enough that Huawei can produce 7nm-5nm-ish phones and sell them at profit.
A teardown of the latest Huawei phone revealed that the chips produced more heat than TSMC equivalent. However, Huawei worked around that by investing massively into avdanced heat dissipation technology improvements, and battery capacity improvements. Success in semiconductor products is not achieved along only a single dimension, there are multiple ways to overcome limitations.
Another perspective is that, by domestically designing and producing chips, they no longer need to pay the generous margins for foreign IP (e.g., Qualcomm licensing fees), which is a huge cost saving and is beneficial for the economics of everything.
Yes but that doesn't answer the question of how they got so close to nvidia.
> It could also happen that all their DUV investment allows them to discover a valuable DUV-derived tech tree branch that the west hasn't discovered yet.
But why wouldn't the west discover that same branch but now for EUV?
> Results are at least good enough that Huawei can produce 7nm-5nm-ish phones and sell them at profit.
Sidenote, I'd love to see some photos and an analysis of the quality of their process.
China is known for their countless theft of Europe and especially American IP, selling it for a quarter of the price, and destroying the original company nearly overnight.
Its so bad even NASA has begun to restrict hiring Chinese nationals (which is more national defense, however illegally killing American companies can be seen as a national defense threat as well)
https://www.bbc.com/news/articles/c9wd5qpekkvo.amp
https://www.csis.org/analysis/how-chinese-communist-party-us...
This is the simple explanation. We'll also see European companies matching them in time, probably on inference first.
1. An h20 is about 1.5 generations behind Blackwell. This chip looks closer to about 2 generations behind top end Blackwell chips. So ~5ish years behind is not as impressive especially since EUV is likely going to be a major obstacle to catching up which China has no capacity for
2. Nvidia continues to dominate on the software side. Amd chips have been competitive on paper for a while and have had limited uptake. Now Chinese government mandates could obviously correct this after substantial investment in the software stack — but this is probably several years behind.
3. China has poured trillions of dollars into its academic system and graduates more than 3x the number of electrical engineers the US does. The US immigration system has also been training Chinese students but having a much more limited work visa program has transferred a lot of knowledge back without even touching IP issues
4. Of course ip theft covers some of it
Nowadays, whenever some Chinese engineers dared to propose using some American parts, the challenges he/she had to face is always "who is going to be responsible if it is not reliable enough for its supply?"
If that happens, China in turn can export those Chips to countries that are in dire need of Chips, like Russia. They can export to Africa, South-America and the rest of Asia. Thus resulting in more competition for Nvidia. I see bright times ahead, where the USA no longer controls all of the worlds chip supply and OS systems.
I see this as an absolute win.
China has managed to monopolise the production (cheap prices) and advance the refinement process, so other domestic projects to extract rare earth minerals were not really profitable. To start it again would take some time.
pixelesque•2h ago
https://www.ft.com/content/12adf92d-3e34-428a-8d61-c91695119...
rapsey•2h ago
narrator•2h ago
smokefoot•2h ago
rapsey•2h ago
sampullman•1h ago
Looking at the Chinese semiconductor development trajectory, and considering that TSMC won't be sitting on their hands, "within a decade" seems really unlikely.
rapsey•58m ago
China has immense engineering capability and is replicating the entire western semiconductor supply chain within its borders.
They have the money, the engineering capability, the will and full support from the government. It is inevitable.
sampullman•3m ago
The key word you mention is "replicating." They'll be chasing for a while still, and it's not clear that they'll be able to leap ahead. Copying is much easier than real innovation.
windexh8er•1h ago
It's amazing how China has doubled down into STEM and green energy while the US has done exactly the opposite. The CHIPS Act propped up a company further driven into the ground by Pat Gelsinger. The last few administrations have had no focus on driving innovation and technology - only propping up the Tech Bro market making money off of attention and ads. Maybe, just maybe, the US should stop electing geriatric and short term gains ignorance?
The US needs to dig its head out of its ass if it wants to continue to be recognized as the global power it once was.
impossiblefork•36m ago
Securing Taiwanese independence is going to be necessary for the EU to ensure that there isn't a US microchip monopoly, and the only way the EU can do this is by the aforementioned means.
brookst•2h ago
pjmlp•2h ago
glimshe•2h ago
The jury is out there about whether China can take a meaningful lead in any major technological field the US and Europe are actively invested in.
xbmcuser•1h ago
jcfrei•1h ago
dworks•1h ago
jcfrei•1h ago
dworks•1h ago
csomar•1h ago
paganel•32m ago
alephnerd•19m ago
China has built a successful tech pipeline, but it doesn't translate to significant prosperity in a country where median household disposable incomes are around $400/mo [0] - much lower than their peers in Thailand [1]. And China's HDI only caught up with Thailand's over the past 2-3 years, and China's GDP per capita has been stagnant for 4 financial years now.
This does NOT imply Chinese collapse, but it does highlight real issues that exist with the China story.
From a power projection perspective, China has capabilities that very few nations have and can tie with the US, but that has not translated to mass prosperity in the way growth in 1970s and 1980s Japan did. It is still an open question about whether or not China "Japanifies" or not.
China is now at a crossroads, similar to what South Korea, Thailand, and Malaysia faced in the 1990s.
[0] - https://www.stats.gov.cn/english/PressRelease/202501/t202501...
[1] - https://www.nso.go.th/nsoweb/storage/survey_detail/2023/2023...
paganel•2m ago
Yes, and that’s a big plus for China, it means that there’s still room for productive growth. The also means that the price of labor will still continue to be competitive.
alephnerd•49s ago
The median Chinese in 2025 is also much older than the median Japanese was in 1990 when their bubble burst.
hollerith•17m ago
Also, China would not have been able to rise anywhere near as high as it has without intensive use of ocean trade.
In other words, although national economic independence matters a lot, it matters only in specialized circumstances, namely, war that is not restricted to only a few countries, but rather spreads to cover large areas of ocean; Washington's deciding to stop policing the world ocean; or Washington's deciding to stop enforcing a policy of freedom of shipping and freedom of ocean trade for every nation (modulo US sanctions).
JimDugan•1h ago
Have you been living under a rock the past couple of years?
rabidonrails•1h ago
They sell you solar infra so that you can feel good about protecting the world while they continue to build coal plants. For reference, in 2023 they built 95% of the world's new coal plants...
Don't be fooled.
rapsey•1h ago
sschueller•1h ago
I have the feeling the US is creating giant problems by putting massive tariffs on allies and pretending they don't hurt themselves.
9dev•59m ago
sschueller•37m ago
Why would you invest billions to build a factory when the president at anytime just decides that you can no longer build it or it's of "national security" and forces you to sell it at a loss?
At that point I would build the factory in China or India were the market is much bigger and at the moment the risk appears lower.
rhetocj23•12m ago
loudmax•1h ago
mark_l_watson•1h ago
That said, we will probably get away with bullying Europe for a while longer. Canada seems to be standing up to USA pressure fairly well. Europe needs to do the same, and they will probably eventually get there.
dash2•24m ago
mark_l_watson•17m ago
The argument for benefits of US economic power are clear. Less clear is military power:
The Plaza Accord was framed as cooperation among G5 allies. But in practice U.S. security guarantees gave it disproportionate influence. Japan, for example, had little independent military capability, so its security reliance on the U.S. translated into willingness to accept U.S. economic pressure.
contrarian1234•47m ago
lol, people has been saying this for the past two decades. The truth of the matter is everyone and their mom has "structural problems". Each time I visit they quality of life is only improving there and the pace of progress hasn't slowed down
dan-robertson•23m ago
glimshe•14m ago
ajsnigrutin•1h ago
Considering the amount of sanctions coming from US (and EU), it's no wonder that "the rest of the world" is trying to "build their own" <thing> now.
rapsey•1h ago
papageek•1h ago
impossiblefork•41m ago
The EU + US is reasonably close to what China appears to be planning as its long-run population, so if the US and the EU had a real partnership and co-operated effectively they could probably have kept up with China.
Now of course, that isn't what's happened and I think even under Biden there were strong efforts to limit competition from the EU and to disadvantage its industry, so it was always going to go this way, but with a real effort I think something different could have been achieved.
libertine•13m ago
MaoSYJ•2h ago