The new gold boom: how long can it last?
Chip wars with China risk ‘enormous damage’ to US tech, says Nvidia chief
Jensen Huang tells lawmakers to be ‘thoughtful’ about imposing more export controls on Beijing
The chief executive of Nvidia, the world’s most valuable semiconductor company, has warned that the US tech industry is at risk of “enormous damage” from the escalating battle over chips between Washington and Beijing.
Speaking to the Financial Times, Jensen Huang said US export controls introduced by the Biden administration to slow Chinese semiconductor manufacturing had left the Silicon Valley group with “our hands tied behind our back” and unable to sell advanced chips in one of the company’s biggest markets.
At the same time, he added, Chinese companies were starting to build their own chips to rival Nvidia’s market-leading processors for gaming, graphics and artificial intelligence.
“If [China] can’t buy from . . . the United States, they’ll just build it themselves,” he said. “So the US has to be careful. China is a very important market for the technology industry.”
The US’s efforts to prevent China buying or developing advanced chips has become the most aggressive front in a new cold war between the two powers.
Huang’s comments came just days before Chinese authorities announced a ban on US memory chipmaker Micron’s products from critical infrastructure, a move seen as the first significant retaliation against Washington’s export controls.
The Taiwanese-American executive warned US lawmakers to be “thoughtful” about imposing further rules restricting trade with China.
“If we are deprived of the Chinese market, we don’t have a contingency for that. There is no other China, there is only one China,” Huang said, adding that there would be “enormous damage to American companies” if they were unable to trade with Beijing.
Huang added that blocking the US tech industry’s access to China would “cut the Chips Act off at the knee”, referring to the Biden administration’s $52bn funding package to encourage construction of more semiconductor manufacturing facilities — known as “fabs” — in the US.
“If the American tech industry requires one-third less capacity [due to the loss of the Chinese market], no one is going to need American fabs, we will be swimming in fabs,” he said. “If they’re not thoughtful on regulations, they will hurt the tech industry.”
Nvidia has embedded itself at the centre of a global race to develop a new generation of AI tools, becoming the primary source of chips that are used to train the “large language models” that power chatbots such as OpenAI’s ChatGPT.
As excitement has grown around AI, Nvidia’s market capitalisation has more than doubled so far this year to about $770bn, ahead of its latest earnings report on Wednesday. Its valuation now dwarfs US rivals such as Intel and Qualcomm, each worth close to $120bn. Despite a rally among some chip stocks, Nvidia is still far larger than its next nearest rival, Taiwanese chipmaker TSMC, which is worth about $450bn.
However, the California-based company has been blocked from selling its most advanced chips — the H100 and A100 series — to Chinese customers since August when the US imposed export controls on technology used for AI. Nvidia has been forced to reconfigure some of its chips to comply with US rules limiting the performance of products sold in China.
Huang said China made up roughly one-third of the US tech industry’s market, and would be impossible to replace as both a source of components and an end market for its products.
Most of the world’s advanced chips — including Nvidia’s — are made in Taiwan, which Beijing claims as part of its territory. President Joe Biden has said the US would intervene if China took unprovoked military action against Taiwan. Analysts fear such a conflict would lead to severe global disruption in production of everything from cars to computers.
“We can theoretically build chips outside of Taiwan, it’s possible [but] the China market cannot be replaced. That’s impossible,” Huang said. “So you’ve got to ask yourself which way do you want to push it.”
China, including Hong Kong, accounted for more than a fifth of Nvidia’s sales in its latest financial year ending January 2023, according to its annual report, while Taiwan represented more than a quarter.
The figures reflect the “billing location” of its customers, which could include contract manufacturers who then sell on to “end customers” in other markets. Based on last year’s figures, more than $12bn in Nvidia’s annual revenues — almost half its total — might be exposed to any potential conflict in the region.
Huang also reflected on his failed takeover of UK-based chip business Arm due to regulatory hurdles, saying he’d been “deeply hurt” and it was no longer “easy for us to invest” in the UK. “I built the first implementation of the AI supercomputer in England, the Cambridge-1. I’m not going to build another,” he said. “I’m done.”
Siemens chief vows to ‘defend and expand’ market share in China
Roland Busch stresses its importance for innovation despite pressure from Berlin to diversify
The chief executive of Siemens has vowed to expand its market share in China, arguing the market is crucial for innovation and growth at the industrial conglomerate.
The comments by Roland Busch come as German companies are under increasing pressure to diversify away from China, as Berlin seeks to reduce its dependence on what it perceives as a geopolitically risky market after being stung by its reliance on Russian gas.
Busch, however, told the Financial Times that it was “not an option” to pull out of the market, which accounts for 13 per cent of company revenues.
“I will defend my market share, and if I can, I will expand it,” said Busch, who took over at the helm of Siemens, one of Germany’s largest companies, in late 2021.
“Where can I find the customers which pull me into the next level of innovation, which are demanding, and which are looking for the next technology?” he asked. “It’s China in very many cases.”
Siemens has in the past few years transformed from a sprawling engineering group that made products such as washing machines to a tech company focused on developing digital tools for industrial use.
It sold its 50 per cent stake in its home appliances joint venture to Bosch in 2015 and the group still holds stakes in several of its former companies that were spun out to form standalone entities. Those include medical technology unit Siemens Healthineers and Siemens Energy, which in turn owns renewable energy business Gamesa.
The German group, which employs more than 311,000 people, last week raised its guidance for a second time this year thanks to margin increases in its smart infrastructure and digital industries units. The results were helped by the easing of global supply chains, which allowed the company to chip into bloated order books.
Siemens’ share price has jumped by a third in the past year to about €150.
China, where wages and labour costs have been gradually rising in recent years, has become particularly important to Siemens’ digital industries arm, which focuses on automation and makes roughly a fifth of revenues in the country.
Many companies, including Siemens, have been looking to move manufacturing away from China to other countries in south-east Asia where wages are lower. Others are worried that rising geopolitical tensions with the west over Taiwan, and US curbs on China’s access to advanced technology, are hitting the country’s viability as a manufacturing base for exports.
Busch noted that the decline in China’s attractiveness as an investment destination for overseas manufacturers was one reason why “high-tech manufacturing” has been high on Beijing’s agenda.
“I’m not saying that China is deindustrialising,” Busch said. With increasingly technologically advanced factories, the country’s industry would be able to “defend their value but in a different way”.
“China will do their own work in terms of high tech manufacturing — this is clearly on the agenda”.
After Hours Summary: PTCT -21.4% after drug did not meet primary endpoint; seen as positive for peer RETA +9.8%; URBN +9.3%, PANW +3.8% higher on earnings; NEWR -7.5%, A -6.5%, INTU -5.5% lower on earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: URBN +9.3%, PANW +3.8%, CAAP +3.5%, TOL +3.4%, VFC +2.8%
Companies trading higher in after hours in reaction to news: RETA +9.8% (PTCT FA drug not meeting primary endpoint seen as positive for RETA), LRMR +3% (PTCT FA drug not meeting primary endpoint seen as positive for LRMR), ORLY +1.8% (increases share repurchase auth by $2 bln), AMC +1% (Antara Capital Master Fund LP disclose 15.4% stake), ODFL +0.3% (in sympathy with LSTR guidance), RKLB +0.2% (purchases bankrupt rocket firm Virgin Orbit's assets and equipment for $36 mln, according to CNBC), LMT +0.2% (awarded $195 mln US Navy contract), USPH +0.1% (files mixed shelf securities offering; also files $150 mln stock offering)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: NEWR -7.5%, A -6.5%, INTU -5.5%, LSTR -3% (lowers guidance)
Companies trading lower in after hours in reaction to news: PTCT -21.4% (FA drug did not meet primary endpoint; also announces strategic pipeline prioritization; to reduce workforce by about 8%, CFO to step down), NVTS -10.1% (commences $80 mln stock offering), PHAT -9.3% (resubmits Erosive GERD NDA to FDA; also stock offering), HASI -4.4% ($300 mln stock offering), WERN -3.4% (in sympathy with LSTR guidance), ECVT -1.7% (announces offering by selling stockholder; also announces intention to repurchase 4 mln shares in the offering), ETNB -1.4% (files mixed shelf securities offering), CHRW -0.4% (in sympathy with LSTR guidance), GOCO -0.1% (board establishes special committee to consider acquisition proposal)
>>> Up
* Africa Oil Raised to Overweight at Barclays; PT C$4.22
* Azelis Raised to Outperform at Oddo BHF
* Big Yellow Group Raised to Add at Numis; PT 1,420 pence (+)
* Chevron Raised to Buy at HSBC; PT $189
* Chevron Raised to Buy at CFRA; PT $172
* Danske Bank Raised to Neutral at JPMorgan; PT 180 kroner
* Qiagen Raised to Overweight at Morgan Stanley; PT 50 euros
* Richter PT Raised at Berenberg on Vraylar’s Sales Potential
* Shop Apotheke Raised to Equal-Weight at Morgan Stanley
* Wulff-Group Raised to Buy at Inderes; PT 4.30 euros
>>> Down
* Abrdn European Logistics Cut to Sector Perform at RBC
* BKW Cut to Reduce at Baader Helvea; PT 160 Swiss francs
* Future PLC PT Cut to 668 pence from 1,153 pence at Canaccord
* Repsol Cut to Hold at HSBC; PT 14.50 euros
* Victrex PT Cut to 1,590 pence from 1,900 pence at Jefferies
>>> Initiation
* AFC Energy Reinstated Buy at Peel Hunt; PT 125 pence
* Cleveland-Cliffs Rated New Neutral at JPMorgan; PT $18
* Coats Rated New Outperform at BNPP Exane; PT 100 pence
* Essentra Rated New Outperform at RBC; PT 260 pence
* GrafTech Rated New Neutral at JPMorgan
* Julius Baer Cut to Underperform at KBW; PT 62 Swiss francs (+)
* Leroy Cut to Hold at Nordea
* Nucor Rated New Underweight at JPMorgan; PT $130
* Orron Energy Rated New Buy at SEB Equities; PT 17.70 kronor
* Pod Point Group Rated New Buy at Peel Hunt; PT 120 pence
* Precigen Rated New Neutral at JPMorgan
* Steel Dynamics Rated New Underweight at JPMorgan; PT $82
* Stelco Holdings Rated New Neutral at JPMorgan; PT C$48
* U.S. Steel Rated New Neutral at JPMorgan; PT $24
>>> Call
* BKW Cut to Reduce at Baader Helvea Following Strong Rally
* Citi Strategists Hail ‘Return of Bullish Flows’ to US Equities
* Coats New Outperform at BNPP Exane as Investment Concerns Fade (+)
* Danske Bank Upgraded at JPM on Capital Distribution Capacity
* Essentra New Outperform at RBC on Good Position, Margin Outlook
* Goldman Strategists Say Big Tech Tops 1Q Hedge Fund Long Trades (+)
* Qiagen Upgraded at Morgan Stanley on Undervalued Growth Outlook
* Richter PT Raised at Berenberg on Vraylar’s Sales Potential (+)
* Shop Apotheke Raised, But MS Stays Cautious on ePharmacy Sector
- Ryanair (RY4C TH) +1.6%
- Qiagen (QIA TH) +1.6%
- Qiagen Upgraded at Morgan Stanley on Undervalued Growth Outlook
- Rio Tinto (RIO1 TH) +0.9%
- Iron Ore Extends Drop to Fourth Day on Sluggish China Recovery
- Vodafone (VODI TH) +0.7%
- Deutsche Bank (DBK TH) -0.8%
- Siemens Energy (ENR TH) -0.9%
- Engie (GZF TH) -1.4%
- ArcelorMittal (ARRD TH) -1.7%
- Watch European Miners as Weak China Recovery Weighs on Iron Ore
- Games Workshop (G7W TH) -1.8%