It's 'game over' for Nvidia in China: Huawei's reported new chip

00:00 Speaker A

Shares of Nvidia are down a small implicit 2% aft quality the Chinese institution Huawei is processing an AI spot it believes tin vie with Nvidia's H100. That's according to the Wall Street Journal. For a person look astatine the spot sector, I privation to bring successful Brian Colello. He is Morningstar's equity strategist. Brian, large to talk with you this morning. Talk to maine astir this imaginable contention coming successful from China, specifically Huawei here. To what grade is that a existent headwind for Nvidia?

00:33 Brian Colello

Oh, I deliberation the headwind is successful spot and I deliberation it's beauteous overmuch crippled implicit for Nvidia successful China. I deliberation the prohibition of the H200 was astir apt the last straw of Nvidia being capable to merchantability thing halfway decent into China, and I would expect that Huawei's products volition astir apt beryllium uh higher prime than uh the older products that Nvidia has been shipping oregon the H200 uh, if not today, past astatine immoderate constituent successful the caller fewer successful the adjacent future. So I bash deliberation Nvidia is beauteous overmuch chopped off, and and I bash deliberation of Nvidia from present connected retired is overmuch much of a uh developed marketplace story. There's inactive plentifulness of maturation successful the US, Europe, um truthful I I'm overmuch much focused connected on those markets astatine this point.

01:41 Speaker A

Brian, I had to cheque the transcript erstwhile I sat down successful my caller spot implicit present to marque definite I heard you correctly. You are precise bearish Nvidia China concern specifically disconnected the backmost of this news. What bash you deliberation that initiates for Nvidia? Do you deliberation they perchance rotation disconnected the China concern astatine immoderate point, oregon bash you deliberation they conscionable chopped their losses and put successful different markets?

02:15 Brian Colello

Well, I I deliberation they already person a 5 and a fractional cardinal dollar write-off, and we'll perceive from them much successful in precocious May, truthful maybe, you know, it's possible. Maybe there's thing they volition beryllium shipping, um, but I I deliberation the restrictions person chopped the materiality of of the China concern successful steps, and I deliberation this H200 uh chopped and the 5 and a fractional cardinal write-off is um arsenic adjacent to the last straw arsenic I could deliberation of. I deliberation they conscionable locomotion distant and absorption connected the US.

03:04 Speaker A

And speech to maine arsenic

03:06 Brian Colello

As agelong arsenic um arsenic agelong arsenic they can, I mean, there's if the restrictions get lifted, Nvidia would emotion to beryllium backmost there, but I I conscionable don't deliberation the US uh authorities volition fto them, rather frankly.

03:18 Speaker A

So then, what does that mean for American investors, particularly arsenic we bash caput towards those Nvidia earnings? Do you deliberation that determination is inactive a bull lawsuit for this sanction successful the abbreviated term?

03:31 Brian Colello

Absolutely. I deliberation Nvidia is inactive selling everything they tin marque connected the Grace Blackwell side. Um there's inactive tremendous maturation from the hyperscalers, Google, Microsoft, etc. We're seeing fewer signs, if any, that they're truly slowing spending successful 2025. It seems similar they're buying each the Blackwells they tin for this twelvemonth due to the fact that of the show improvements, and we're inactive skeptical that US companies are going to dilatory down their AI investments, adjacent with the recession. AI is the future. It is uh surely a contention close now, uh and we deliberation that spending continues successful the abbreviated term. So I deliberation Nvidia is acceptable up. Now, China uh could beryllium a hit, truthful possibly we bash spot um, you know, little net maturation this year, little gross growth, I possibly adjacent revenues down 4th implicit 4th due to the fact that of the large China hit. We'll spot connected that, but everything other should beryllium beauteous good, and there's inactive a batch to beryllium bullish astir for the US and AI successful the future.