By coinnews 
00:00 Speaker A
Shares of Nvidia are down a little over 2% after news the Chinese company Huawei is developing an AI chip it believes can compete with Nvidia’s H100. That’s according to the Wall Street Journal. For a closer look at the chip sector, I want to bring in Brian Colello. He is Morningstar’s equity strategist. Brian, great to speak with you this morning. Talk to me about this potential competition coming in from China, specifically Huawei here. To what extent is that a real headwind for Nvidia?
00:33 Brian Colello
Oh, I think the headwind is in place and I think it’s pretty much game over for Nvidia in China. I think the ban of the H200 was probably the final straw of Nvidia being able to sell anything halfway decent into China, and I would expect that Huawei’s products will probably be uh higher quality than uh the older products that Nvidia has been shipping or the H200 uh, if not today, then at some point in the new few in the near future. So I do think Nvidia is pretty much cut off, and and I do think of Nvidia from here on out is much more of a uh developed market story. There’s still plenty of growth in the US, Europe, um so I I’m much more focused on on those markets at this point.
01:41 Speaker A
Brian, I had to check the transcript when I sat down in my new seat over here to make sure I heard you correctly. You are very bearish Nvidia China business specifically off the back of this news. What do you think that initiates for Nvidia? Do you think they potentially spin off the China business at some point, or do you think they just cut their losses and invest in other markets?
02:15 Brian Colello
Well, I I think they already have a five and a half billion dollar write-off, and we’ll hear from them more in in late May, so maybe, you know, it’s possible. Maybe there’s something they will be shipping, um, but I I think the restrictions have cut the materiality of of the China business in steps, and I think this H200 uh cut and the five and a half billion write-off is um as close to the final straw as I could think of. I think they just walk away and focus on the US.
03:04 Speaker A
And talk to me as
03:06 Brian Colello
As long as um as long as they can, I mean, there’s if the restrictions get lifted, Nvidia would love to be back there, but I I just don’t think the US uh government will let them, quite frankly.
03:18 Speaker A
So then, what does that mean for American investors, especially as we do head towards those Nvidia earnings? Do you think that there is still a bull case for this name in the short term?
03:31 Brian Colello
Absolutely. I think Nvidia is still selling everything they can make on the Grace Blackwell side. Um there’s still tremendous growth from the hyperscalers, Google, Microsoft, etc. We’re seeing few signs, if any, that they’re really slowing spending in 2025. It seems like they’re buying all the Blackwells they can for this year because of the performance improvements, and we’re still skeptical that US companies are going to slow down their AI investments, even with the recession. AI is the future. It is uh certainly a race right now, uh and we think that spending continues in the short term. So I think Nvidia is set up. Now, China uh could be a hit, so maybe we do see um, you know, less earnings growth this year, less revenue growth, I maybe even revenues down quarter over quarter because of the big China hit. We’ll see on that, but everything else should be pretty good, and there’s still a lot to be bullish about for the US and AI in the future.