Nvidia's China Future Remains Unclear

Bloomberg

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00:00You and your colleagues, you develop predictive scenarios, executable strategies for organizations

00:04worldwide with research specializations. You particularly look at AI, at biotech. And Amy,

00:09what did you make of Trump and Xi's relations this week? Because

00:13match was left unsaid rather than just said. That's right. I mean, I think the result here

00:20was certainly a de-escalation rather than a full reset, but it definitely did not end the AI

00:26Cold War or some of the consternations around other frontier technologies that are

00:31often in the mix when we talk about these two countries. So I would argue that this sort of

00:36moves the battlefield away from tariffs, but over to transistors for the time being.

00:41OK, let's go to transistors, because much was hyped that maybe Blackwell architecture chips

00:46from NVIDIA would be discussed between the two leaders. And it wasn't. We understand today that

00:51Jensen Wang is still optimistic that he'll get some sort of access to China. What do you think

00:55about the realities of that? Well, I think at the moment, what we have

01:00is predictability, where all we had before was growing uncertainty. So this could ease some

01:06short-term supply chain fears. So that definitely helps companies like NVIDIA and AMD and other

01:12U.S. semiconductor toolmakers who had been frozen out of Chinese markets. But I also don't think

01:18that NVIDIA is going to be allowed to sell just whatever it wants. That said, given NVIDIA's new

01:25$5 trillion valuation, which also happened this week, this is really, really important, not just

01:30for investors, but for our entire economy. I think something like 40,000 companies use NVIDIA GPUs

01:37for AI and for accelerated computing. And their biggest customers are the big tech companies,

01:44Microsoft, AWS, Google, Oracle. And by market cap, these are some of America's biggest companies. So

01:49I don't think that the doors are open and there's going to be a fire sale overnight. But I do think

01:54there's reason to be more optimistic than maybe before. But Amy, why does it matter to the U.S. economy

02:00and some of the big players in NVIDIA? Because NVIDIA hit that $5 trillion market capitalization

02:06while saying they had zero sales into China, the idea being that they can actually go it alone.

02:13Well, I think that's true today. The issue is what's coming in the future. So the CCP,

02:18every couple of years, every five years, they have very secretive meetings held in Beijing

02:23on their five-year plans. And this happens with regularity. China's top, so this meeting just

02:29happened. And China's top priority is building what it's calling a modern industrial system,

02:34which is really code for making old industries smart and new industries unstoppable. So what

02:40this means is heavily investing in frontier sectors like aerospace, biomanufacturing, quantum,

02:47advanced materials, and improving supply chains. All of this requires those advanced chips. So

02:56effectively, what this means is today, NVIDIA is probably fine. Going into the future,

03:01it gives Chinese AI champions and local chip makers much more time to domesticate their operations,

03:08their supply chains, and push their own homegrown chips, which is potentially great for China,

03:14but bad for the West. So kind of more deep-seek moments, but from the actual underlying technology,

03:20not just the LLMs that is built upon it, Amy. I'm interested in what really the chokehold that China

03:25had found it had was rare earths. And there was some discussion around there, but how quickly is

03:31the US and Western nations able to become self-dependent in their own way on that front?

03:38Look, I would love to offer some better news here, but the reality is that the materials for

03:42semiconductors come from, you know, basically one place on the planet. While in the future,

03:48I think we'll be able to engineer our ways around those materials and those magnets. But at the moment,

03:54we're kind of hamstrung. And as much as the Trump administration has promised to make

03:59significant investments into advanced manufacturing here in the United States, the reality is nobody's

04:05going to be able to catch up when it comes to advanced manufacturing at scale, certainly not

04:10over the next four years, not even here in the United States. So it doesn't mean that we're all at a

04:16huge competitive disadvantage. It does mean that even if the domestic market isn't hot within China,

04:22the CCP is banking on industrial modernization as the backbone of its national competitiveness. And it

04:29has government sponsorship and support and tremendous capital that it can put toward that effort.

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