Wall Street analyst shares 7 thoughts on the emergence of the Huawei Ascend chip

Investing.com -- With multiple media reports circling around the Huawei Ascend 910C chip, Piper Sandler analysts assessed the potential impacts on the industry in a note Thursday. 

The firm said that if the recent media reports are true regarding the capabilities of Huawei’s Ascend 910C chip, there could be seven key implications for the semiconductor sector, with the firm focusing on Nvidia (NASDAQ:NVDA) and U.S.-China tech competition.

“If media reports are true,” Piper Sandler wrote, “China’s leading edge compute capabilities are not as handicapped as we may have thought before.” 

The firm warned that existing export restrictions “may not be strict enough,” as loopholes still allow China access to critical technologies such as high-bandwidth memory (HBM) and advanced wafer production.

On Nvidia’s China business, analysts said the Ascend 910C “provides Chinese compute customers with a viable second source at a minimum with much less risk,” even if the H20 chip were unrestricted. 

They added that “any future generations of compute chips for China from NVDA will most likely come under threat.”

Piper Sandler was skeptical about the H20’s resale potential, noting that “we do not see any CSPs or countries that would have the need for such a large stack of old technology chips.”

While the firm questioned the full validity and timing of reports, it acknowledged that “the system level jumps the Chinese have made through optimizations in networking and software” are difficult to ignore.

Over the long term, the chip could be domestically produced as Chinese foundries improve yields, according to the firm. If export controls remain, “Huawei could further bridge the performance gap,” potentially allowing China to make “significant strides in LLM performance.”

Finally, the emergence of the CloudMatrix cluster, built on Ascend chips, highlights a leap in infrastructure. 

“The country has embraced more advanced networking solutions such as optics which has parred the gap to NVDA systems,” Piper Sandler noted.