00:00Right, let's take a look at this NVIDIA story and this ongoing feature, of course, when it comes to geopolitics and this trade, let's call it trade in terms of the concepts between the two sides.
00:12So we're learning more about why President Trump has greenlit sales of the H200 chip, specifically to China.
00:19Sources say it comes down to the strength of the mainland semi-ecosystem.
00:24Annabelle is here with us to help us unpack that for us.
00:27And what else are we hearing and just what's forced?
00:31Is forcing an accurate word incentivize the White House to allow this to happen?
00:35No, I mean, it forces a rethink, at least, of your policies.
00:38And it comes down to, yeah, how you benchmark NVIDIA's progress versus what you're seeing in mainland China and the whole push from the U.S. like what you see in China.
00:47But both want to retain their lead or China wants to catch up, but the U.S. wants to retain its lead.
00:52And when it was making these decisions, what we're understanding from sources is that it was looking at how's NVIDIA going versus what we're seeing from the best in China, and that's Huawei.
01:01And so what they did was look at one of the Huawei systems that's essentially a platform known as Cloud Matrix 384 or 384.
01:08It's built using the Ascend chip series, which is Huawei's AI chips.
01:14And they found that actually when you benchmark the progress or the performance of that system versus what you see from NVIDIA's NVL 72, which is built using Blackwell chip architecture, actually the performance was looking pretty similar.
01:28And so that made them think, OK, actually Huawei is really catching up here.
01:33If we want to try and retain that lead and we need to then give them more advanced products, because the whole idea is that the Trump administration wants Chinese companies to build using U.S. architecture and infrastructure to try and then also reduce that push to build out that self-reliance, at least domestically, because still NVIDIA is more advanced, at least by an 18-month window.
01:56And the other factor they were looking at for this decision-making was also the production capabilities, because SMIC and Hua Huang are the two main foundries.
02:04SMIC really is the one that can do more advanced nodes than what you can get from Hua Huang.
02:09But actually, we're hearing as well, and the White House is estimating, that they're going to be able to build millions of these AI processes next year, possibly.
02:16So that also creates that urgency to act and to shift on the H-200 policy.
02:22Yeah, and the FT has some good reporting on just how China is responding, of course, to this news of maybe possibly limiting the amount of H-200 chips that do come into China and other ways to really preserve its domestic chip sector.
02:35Yeah, exactly. Yeah.
02:35There's been two different stories from the FT this morning, and they sort of work together quite nicely.
02:40But to go to that first one, yeah, they're looking at limiting access to H-200.
02:44One of the ways they're doing that is looking at maybe restricting buyers or purchases of the H-200 chips, also maybe saying to companies,
02:52you need to justify why you want this H-200 versus what you can get domestically.
02:57So that's one policy, is to essentially limit companies directly.
03:01The other is to continue to build up and to focus on domestic players.
03:06And one way they can do that as well, and the FT is saying, is that actually the domestic AI chips have been put on an official procurement list for the first time ever.
03:15So now government agencies, or it's a government-approved, essentially, list of supplies for the likes of Huawei, also CanberraCon.
03:22But it's another way to push, I guess, and promote that local chip design or chip ecosystem.
03:26So they're two different stories, but I think it also tracks very nicely with what we have for our Bloomberg intelligence team.
03:32And they're sort of saying the same thing here, that this NVIDIA U-turn is coming too late.
03:37You've already got names like Baidu, Alibaba, Tencent that are preferencing local chip makers just because the U.S. administration has been flip-flopping too much on its policy.
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