How DeepSeek became a lifeline for NVIDIA's chips in China
What's the story
NVIDIA's H20 artificial intelligence (AI) chips have witnessed a massive spike in demand in China, courtesy the widespread adoption of DeepSeek's affordable AI models. Leading tech giants such as Tencent, Alibaba, and ByteDance have significantly ramped up their orders for these processors. The development highlights NVIDIA's continued dominance in the global AI hardware space despite the looming possibility of new restrictions from the US government.
Broadening reach
DeepSeek democratizes access to AI technology
DeepSeek's rise has democratized the use of AI technology, extending its reach beyond financial and telecom sectors. Industries such as healthcare and education are now incorporating AI into their operations, creating a new demand for AI chips. This development counters initial apprehensions that DeepSeek's efficiency might decrease the need for high-powered processors.
Model efficiency
DeepSeek's AI models prioritize inference-based computing
Unlike traditional AI models that need a lot of raw computing power, the systems of DeepSeek focus on inference-based computing. This means they prioritize efficiency in generating responses over heavy data processing. Surprisingly, this has not only addressed initial concerns but also resulted in a surge in the deployment of AI-driven apps and an increased demand for AI chips like NVIDIA's H20.
Market dominance
H20 chips dominate despite trade restrictions
Despite Chinese chipmakers like Huawei developing their own AI processors, NVIDIA's H20 continues to set the industry standard. In 2024 alone, over one million H20 chips were shipped, generating a revenue of $12 billion for NVIDIA. This shows that even amid trade restrictions, NVIDIA's technology remains unrivaled in the Chinese AI market.
Regulatory compliance
H2O chips comply with export regulations
The US has banned exports of NVIDIA's most advanced AI processors to China. However, the H20 was specifically designed to comply with these export restrictions. This strategic move has enabled NVIDIA to maintain its foothold in the Chinese market, even as Washington considers tightening restrictions further.
AI integration
DeepSeek's AI models find widespread application in China
DeepSeek's meteoric rise has made it widely used across China. Tencent is beta-testing these AI models within WeChat, while Great Wall Motor has integrated DeepSeek's AI into its smart vehicle systems. Other major companies are also looking into AI integration, which only further strengthens the case for high-performance AI processors like the H20.