The a16z Show - H20s to China + 15% with Chris Miller and Lennart Heim

Episode Date: August 14, 2025

We’re sharing an episode from ChinaTalk that dives into one of the biggest recent reversals in U.S. tech policy.The U.S. banned Nvidia’s H20 AI chips to China in April. Now, just months later, they’re being sold—with a 15% export fee. What happened? Why the reversal? And what does it mean for the future of AI competition between the U.S. and China?Chris Miller—author of Chip War—and Lennart Heim from RAND join ChinaTalk host Jordan Schneider to unpack the policy flip-flop, why China is publicly downplaying interest in the H20, and why high-bandwidth memory and semiconductor manufacturing tools may be even more important than the Nvidia chips themselves.Resources:Listen to more from ChinaTalk: https://link.chtbl.com/chinatalkCheck out the Horizon Fellowship to work in DC on emerging tech policy issues like AI chip export controls: https://horizonpublicservice.org/applications-open-for-2026-horizon-fellowship-cohort/Outro Music: It's a Shame, The Spinners, 1970 Stay Updated:Find a16z on YouTube: YouTubeFind a16z on XFind a16z on LinkedInListen to the a16z Show on SpotifyListen to the a16z Show on Apple PodcastsFollow our host: https://twitter.com/eriktorenberg Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures. Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Emergency Podcast. We're bringing back Leonard Haim of Rand and Chris Miller. You guys know who Chris Miller is. To talk the new H20 drama. We went from banning it in April to now selling it with a 15% export fee. All right, Leonard, why don't you start our narratives? What is the H20? Why should you care about it?

And what were the first few months of the Trump administration doing when it came to this chip? The H20 is this chip, which in Vida designed as a response to export controls in 2023, right? It's a typical game. You draw some lines and then new chips get created right below the lines. And the H20 is such an example, but it did a neat trick. It maxed out the specifications which are not controlled. Memory bandwidth. So putting on the best high bandwidth memory world currently has on this chip

and created an export control compliant chip, which I think was introduced at beginning of 2004, so a couple of months after the update. And we were sold over 2024, lots of interest in this chip. And when then the term administration started in January, they, well, we can say the Biden administration didn't get to it. I think it was definitely a way off this problem. Many of their officials came out and many of them even favor,

but they just never got to banning to it because, again, many stakeholders, many different opinions and also just kind of running out of time. But Trump then banned this chip, as we saw reported in April 2025. Not via the normal means how you do it, not via passing regulation, via using a cool tool called Is informed letters, because they're pretty fast. And you can just send a letter to the companies which produce these chips and tell them like,

hey, you can't sell these chips anymore because we expect there's an export control violation going on and we actually think this chip is too good. So that's where we started. So the chip was banned, for my personal point of view, a big success. I think this chip should not be sold. We need to reduce our thresholds. This is just simply too good off a chip.

And well, then this was the latest status. And I think in the last few months, last few weeks, we saw some flip-flopping back and forth and every day revealed some information. And I don't know, while we talk, probably more things will come out over time. All right. So this was President Trump on Monday. Ask you two questions. One about China, one about Russia, if I could. On China, if your administration agreed to send the most advanced or advanced Nvidia and AMD chips.

No, obsolete, no. Absolutely, chin. And then 15% of the profits come back. I mean, the 20s. No, no. This is an old chip. that China already has and I deal with Jensen

who is a great guy and Navidia the chip that we're talking about the H20 it's an old chip China already has it in a different form, different name but they have it

or they have a combination of two will make up for it and even then some now Jensen also has Jensen's a very brilliant guy and Jensen also has a new chip, the Blackwell. Do you know what the Blackwell is? The Blackwell is super duper advanced. I wouldn't make a deal with that,

although it's possible I'd make a deal a somewhat enhanced in a negative way, Blackwell. In other words, take 30% to 50% off of it. But that's the latest or the greatest in the world. Nobody has it. They won't have it for five years. but the H20 is obsolete. You know, it's one of those things, but it still has a market.

So I said, listen, I want 20% if I'm going to prove this for you for the country, for our country, for the U.S. I don't want it myself. You know, every time I say like 747, I want, I want, yeah, for the Air Force. So I just want it. So when I say I want 20, I want for the country, I only care about the country, I don't care about myself. And he said, would you make it 15? So we negotiate a little deal. So he's selling a essentially old chip

that Huawei has a similar chip, a ship that does the same thing. And I said, good, if I'm going to give it to you because they have a stopper, what we call a stopper, not allowed to do it. It's really known as a restrictive covenant. And I said, if I'm going to do that, I want you to pay us as a country something

because I'm giving you a really, I released them only from the H20. Now, on the Blackwell, I think he's coming to see me again about that. But that will be an unenhanced version of the big one. Like, I don't know if you know, we will sometimes sell fighter jets to a country and we'll give them 20% less than we have. Do you know what I mean? It's just, yeah, it's crazy to see these discussion.

Also to the level of sophistication here, right? knowing the H20s, knowing the Blackwells by name, knowing what Huawei. It's clearly a big topic now where this whole exponent of things in the spotlight. So I think it's a good moment to kind of take a step back and look at the arguments in favor and against selling China AI chips. So against selling, you have broadly the argument that selling AI chips helps upgrade the Chinese AI ecosystem that's going to compete with America's broad. and that there are specific applications of the chips that we would be selling to China, which we would be very uncomfortable with, like military ones or intelligence ones or sort of broad human rights violations

that you wouldn't want sort of America and technology to be helping to further. And then the arguments in favor of selling, we have this idea that actually selling Nvidia chips would retard domestic, chip development, make it harder for Smic and Huawei and whoever else wants to try to build a domestic AI chip to find a marketplace. And this idea that selling chips into China would maintain American, you know, Chinese dependency on the U.S. stack. So it keeps Chinese developers using QDA, building infrastructure around U.S. technology,

and, you know, some sort of like broad, soft power agenda setting advantages to be determined that China using Nvidia hardware will give to the U.S. going forward. So maybe we should run through those... Maybe we should run through those systematically, I guess. You know, let's start with the biggest one, which is you shouldn't sell these chips to China

because upgrading the Chinese AI ecosystem is like a strategic threat to the U.S. And I think that's a... I think maybe we'll throw this one. to Chris. I mean, this is a, this is like a grand strategic question almost of like how much of China's rise is okay and how much of it isn't because, you know, the military intelligence, human rights applications are almost secondary to like just how scary you see a richer, more flourishing, more powerful China to be, right? Yeah, and I would even segment out the sort of

richer and more flourishing side and just talk about technological capabilities. They're obviously interlinked, but I don't think U.S. strategy has been to try to make China poorer or less flourishing in general. I think the question is just who's going to lead in AI. The trend over the last five years and really the last 50 years has been that if you want advanced AI, you need lots of advanced computing, and there's a small number of companies who produce the chips in question. And so if you think that advanced technology has matched,

in the past in Tio's Street's Competition, which I think is pretty hard to argue with. It's probably going to matter in the future. And therefore, who wins an AI? You know, it's a little bit reductive to ask, but I think it also matters. And just like we would be less happy if we were all using Huawei phones

and relying on Alibaba Cloud because I think there'd be pretty significant political ramifications that were downstream of that. So, too, if we find ourselves in a future where either the U.S. or third countries are relying on Chinese AI providers, whether for models or for applications or for AI cloud, that implies less political influence for the U.S., a weaker U.S., and a stronger China. And that's the stakes.

And I think to some degree, both sides of this argument agree on that basic framing. Question is, how best do you get there? One argument is that you restrict compute access and thereby hobble the growth of Chinese AI firms. A second argument is that you try to, you know, as Secretary Lutnik has said, get China addicted to the AI stack. And the question to ask is, you know, how addicted are they willing to become? And how addicted could you actually make them? And can you leverage that addiction in the future or not?

And I think these are where the empirical questions are really focused. And I think kind of one more on the in favor of selling argument, this idea that keeping China dependent on, you know, TSM fab chips actually lowers the risk of a Taiwan war, which I have. some questions about, but this is something that Ben Thompson has been pushing, which I think has also percolated into the administration and Congress.

Like, my mom threw me that one the other day. Anyways, I mean, what do you think? What do you make out of it, Jordan? I'm like, for me, it doesn't seem to be the main calculus behind it. Like, I buy it on the margin. I think maybe on the margin

a little bit. I think there's two levels to the question. First, at the political calculus, to go to war or not to go to war. It seems very, this is like, this would be an extremely kind of weighty decision where, you know, the fates of nations would be at stake to do a serious blockade or to, you know, do some strike or some, or some actual, you know, D-Day style invasion. And, you know, whether or not the chips are there, China's sort of like, you know, gaining relatively

or losing relatively in AI hardware just strikes me as like the 12th thing that you would be thinking about if you were a Chinese premier. I mean, domestic political developments in Beijing, political developments in Taipei, just how willing the U.S. is seeming to fight for Taiwan, how excited Japan is to let the U.S. fight from its territory.

all of those strike me as much more germane decisions. And there's a bit of sort of like technological myopia of tech analysts thinking that like, oh, the chips are the one thing that's like the silicon shield stopping it. It's like, no, like we're, I'm sorry. I really, as as cool and important and, you know, over a 50 year period, potentially like world shaking as, you know, advanced semiconductors and artificial intelligence may be. You know, if you are a head of state, this is, and making the biggest decision of your life, I don't think it's really going to come down to like, oh, well, Huawei tells me they can only make 750,000 chips in 2028, so then it's not going to work out. But I do think sort of one level down from that, there is this very open question, which we debated

on Sunday's edition of Second Breakfast, about to what extent the, that, the, the, that, the, chips and the technology that they're going to be enabling, ends up sort of reshaping the military balance of power. And I think that is still very much an open question that smart people can disagree on, on whether or not, you know, whatever you can do with, you know, putting chips in your autonomous drone so they can, like, target without being interfered with

or what have you, you can imagine a lot of different crazy futures, where AI really matters. And by the way, like, it could actually work in the other direction of lowering the risk of Taiwan War if America has a big lead when it comes to semiconductors because then a Chinese or a leader in Beijing

would look at the military balance of power, a balance of power, and the advantage that the U.S. and Taiwanese forces get from being more, you know, AI-a-fied that they see, oh, you know, there's no chance of us winning. why even try to play this game in the first place. I think the other key facet here is that if you look at sales advanced chips from

Taiwan and its ecosystem to China, most of them are not AI chips. It's mostly smartphone chips and PC processors and AI chips are a portion but a small portion. I think it also gets back to the question I know you've raised a lot of shows, Jordan, which is how AGI-I-pilled is Xi Jinping? And the answer is, you know, it doesn't seem that AGI-I-pilled. Best evidence for which is that, you know, Smick and its 7-9-meter production is still producing a whole lot of smartphone chips, which you would not do if you thought we were in a race for AGI which will define the future. So both of those facets, again, point against the silicon

shield as it relates to AI chips being absolutely central here. And also just to clarify, they're not allowed to produce AI chips at TSM. They can produce everything else there. Huawei not, because an entity list, you know, they did some bad stuff, but almost every other Chinese company can just go to TSM and produce chips there, right? So there's like significant flow of chips from TSI as or as we're speaking right now to China, right? Just not a, ideally not AI chips. You know, we had some hiccups in the past where it was also AI chips, right? So I think a key question, Leonard, is how obsolete is the H20 relative to A, what black

wolves can do, but probably more importantly, B, what Huawei can do? You want to walk us through the numbers? What I would just say, I don't think describe the H-20 as an obsolete chip is, is fair, right? chips have many specifications and let me try to break it down two simple ones we should care about the computational power how many flops it has

how many operations per second that can crunch but then also memory bandwidth this means basically you need to read and write memory and the memory capacity and the bandwidth how fast you can read and write this memory is key and one of the key

inventions we've seen of the last few years which actually MD did first is so-called high bandwidth memory which is a pretty complex technology we've got three companies in the world doing it right now. SK-Hinex, Samsung, and Micron, building this H-B-M. And the H-20 is really bad on the flops.

7x worse than H-100, even more, worse, 14x worse than the upcoming chips and the B-100s and more, right? So it's definitely no competitive chip here. But on the memory bandwidth side, which is, again, key for deploying chips, it's pretty good. It's even better than H-100,

because the H-100 uses five units of H-BM, whereas this one has six units of H-H-Bm. So it gets a mind-reliven. like, bugling 4 terabytes per second of high bandwidth memory. And no Chinese chip has such good high bandwidth memory. And more importantly, even if they have right now, like 910C which has some

HBM, I think it sits at 3.2 terabytes per cent, they're not allowed to buy it anymore. It's banned since December 2024. Right. So right now, China would be struggling to, first of all, getting their hands on this HBM and they're trying to produce it domestically, but this will take a bit. And even if they're

produced it domestically, it would initially be worse. So I don't, I don't I think the H20 is an obsolete chip. It's a pretty competitive chip. I think it's definitely fair to say it's a worse chip than many others. That's fair to say. But again, if you look at this other dimension, this dimension of deployment, it's pretty good. It's really, really good.

But I think that is one of the key actions of debate. Some people say the goal is to stop China from training high end and therefore you focus on the flops. If your goal is to constrain inference, you focus more on memory bandwidth. Walk us through the way these different chips are used. Yeah. I think that's a fair debate. to we should be having here, right? Like, we should think about with Xbox controls,

what do we want them to achieve? And I think right now it's fair to say the H20 is not an amazing chip for training AI systems. There are some things which numbers don't always capture, right? Like you still build on top of the Nvidia software stack. If you're a company which used Nvidia before,

there's like a little bit of a pain to switch. There's a bunch of problems with Huawei chips which you don't really see in the specifications, right? The overheat, you need more of them. The software stack isn't great yet. Do you can even get enough? Right?

All of these things just mean that H20 is not a great training chip, but beyond the numbers, it's still used, like, on the software ecosystem. So on the training goal, I think it's still being achieved here. Where the debate begins is, what do we think about deployment? And what at least I've learned over time here is if you want to be really precise, right, if your goal is to only stop them from training, but everything else is below it or you only stop them from training big systems, it's really hard to be precise on all of this. And then AI is ever changing.

And I think the most biggest thing we've seen over, last year is like this rise of test time compute of AI models thinking right how do they think will they produce tokens and that's what the h20 is like really amazing at right so one could say the usability and the importance of the h20 only went up ever since because we got models which do more thinking generating more tokens and also generating tokens to then train the next generation of AI systems right and i think these are the arguments which people would say like well actually this is a pretty good chip right for producing these new things which are like more important in AI development life cycle. So the other argument that the president made is that Huawei already makes these chips,

which is true to an extent, but walk us through the numbers there as you see them. I know that there's questions both about the quality of Huawei's chips as well as the numbers that can be produced. I know Secretary Lutnik said they can produce 200,000 a year. And I suppose that's right. How does that compare with what we're going to see with age 20s? The key dimensions here are just quality and quantity and I think many always talk about the quality argument here. I personally think the quantity argument is way more important. You already mentioned the number from, I think Lutnik said in Kessler also testified that 200,000 A'son ships being produced in 2025. How does this compare to the US? I think we're churning out around 10 million chips this year. So significantly more.

This means if we're selling, and I think there have been projections of our Nvidia selling a million H-20s, we sell them five times more what they can produce. Right. And I think this is where the debate. starts. The quantity argument is like really key here. If you would only sell them a couple of thousands or like 200,000 or something, that's a vastly different debate than selling them a million or potentially even more. And just the sign that China wants to buy them speaks to like their problems with producing domestic chips, right? So on the quantity side, China is simply not there yet. They're getting better and they're producing more chips the minute we speak. That's the case. But there are many difficulties along the, even to produce more chips have the end of high,

bandwidth memory, how good is their smuggling operation to get this memory, how good is their packaging yield, all of these things just add up that you eventually just really can't produce competitive chips. Then at the end, they get chips out of it. If you compare the ASE 9 and C to Nvidia's best chip right now, which is being sold to B200, it's way worse, right? It's way worse on the high band-with memory part, and it's also way worse on the computation performance, and it's also worse than H20, which we're selling, at least on the memory part, which we're seeing here. And the point is, if we're selling the H20, I think what many missed, there's a chip, or at least there were rumors around it, and I think there were pretty good rumors. There's a chip

called the H20E. What does it do? It doesn't use HBM3. It uses HBM 3E. So I previously said it has 4 terabytes per second. If you use HBM 3E, you can probably go up to 5 terabytes per second or even more, right? And which indications do we have that this ship is not getting sold, right? The flops are still being capped, but the memory just continues going higher and higher and higher. And I think that's another thing to be tracking here, and as long as we don't have updated regulations for it, but just don't know where the line is going to be drawn here in terms of quality of memory bandwidth, but also most importantly in terms of quantity. So if I could ask for one thing, please reduce the quantity. I think that's the key thing we

should pay attention to here. I think, you know, one of Nvidia's lines that Jensen has been saying a lot is like they used to have 95% market share before the restrictions and now it's down to 50%. First off, they've never actually given numbers for that. But second, my guess is that they were the only people making, you know, accelerators that people want it. So even if it did go down to 50%, it's not like it was the same pie. Like the pie went down such that that 5% that it used to be now turns into 50% of the whole pie. So the idea that sort of Huawei, like that number does not tell you that Huawei necessarily has, the capacity in order to fill it up.

And as Leonard said, like, Jensen cares about this because lots of Chinese companies are willing to spend his projection is what, like $15 billion a year in sales. And to think that, like, I mean, you know, Huawei and Baidu and Tencent, they are not dumb. Like, they are going to spend billions and billions of dollars of CAPEX. By the way, this CAPEX number, you know, seems small if you're talking about Google and meta, but it's actually pretty large

relative to the sort of total capex that you're seeing from the Chinese hyperscalers. So, like, they're doing this because they think it is useful and important and relevant to their sort of, you know, AI ambitions going forward, not to, like, do Jensen a favor

or anything. Could we talk about what we know in terms of who in China will be the large-scale buyers of these ships? Jordan, you mentioned, Tencent, Alibaba, there's AI firms like Deep Seek, there's bite dance, a huge player in China's AI ecosystem. I don't know whether or if you have a sense of numbers of any of those are public

or at least talk about kind of who are the buyers of these ships inside of China. I don't think we have public reporting of exactly. There's definitely been some reporting that big hyperscale is the big cloud companies, right? Tencent, Bight Dents and others are definitely interested in this. I'm not sure interested in Bight Dens is because they're building tons of clusters in Malaysia. which, by the way, can buy whatever chips they want to buy there and just continue building. So I think just the normal hyperscalers go there,

they will continue buying these kinds of chips, but they're all hatch, right? They all also get asin chips. They're not stupid, right? We just see with the policy flip-flopping. They don't know when they're going to get cut off, right? So they're all just hatching with, like, Huawei Asan chips while they're getting better.

There's something we would just subsidize their transition while we do this, right? And that's like the thing which I'm worried about here. It's just a case. that Huawei will get better, they will produce better chips. I think the ships will be significantly worse and significantly less quality in the US, but they will get better. And that's the thing we all need to acknowledge.

And there was a policy at some point which was made, which just told Huawei they will need to produce their own chips, right? And that's just a pathway going down here. And I think there's like no going back here. The question is like, what do we do in the meanwhile, right? And how big will the gap potentially be? And I'm a firm believer that this will be quite a massive gap, which will have big impact on the AI

competition. And I think that is one of the key lines of debate, but also empirical questions that's hard to really research or get hard data on, which is the decisions of the private tech firms in China, the

Alibabaos, the 10 cents and others. Because to the extent that you're right, that there's a meaningful quality difference between Nvidia and Huawei GPUs, for example, they got a strong incentive to build as much as possible on on invidia so you can see an argument that says well they're going to buy a sense but sort of put them in the closet or not really take them seriously because they want to build their

products but but you're saying no that's probably not the case because even those firms which don't have a strong incentive on their own to help out Huawei do in the context of potential future export controls and loss of access to an invidia chips and so the argument that that that control sort of align the incentives of Tencent and Alibaba with Huawei, the Chinese state. You think those incentives are already at this point fully aligned. Yeah, I think so. I think more importantly here, we should just always, I mean, let's walk through the arguments for it. There are arguments in favor of selling H20.

And I think that's the same debate to be had here, right? On the other side, I think it's sometimes lacking some technical details here. I think the market share argument is a fair argument, right? Just like you want to maintain for Nvidia bigger market chain and reduce demand for Huawei. I just don't think that's the case, right? It's an existential priority for China to produce the semiconductor industry. And importantly, it's not like the semiconductor industry

only gets better because of AI chips. The majority of chips the world produces are not AI chips. Who's producing at the most advanced node at SMIC, but also at TSMC, it's Apple? Usually we produce mobile phones first there. So they're pushing it forward anyways for the newest Huawei smartphone that produce probably soon something like a 6-Nameter node,

which will then be leveraged. to produce better AI chips, right? So even if you reduce the market demand right now, semiconductor industry will get better and these will lead to better AI chips eventually, right? If they're then just like transition to this. And then also what is the tech stack argument here, right? Sure, we keep them hooked on CUDA, right?

And it's a pain to go from CUDA to venture to minesport to the Huawei ecosystem. And I think we can model this as like a one-time transition costs. Many where can companies have done this? Google switched to TPUs at some point, right? and Phropic right now is using the Traneum chips on AWS. I think they pay a significant amount of costs to switching and running these different hardware stakes.

But eventually they're doing it, right? And they will also eventually do it with Huawei. And it's not like if you use Kuder, your systems are not more aligned, you know. Like if you would sell them AI systems who don't spit out CCP propaganda, I'm in favor of that. That's like spreading American values, liberal values, right? That seems fine. But if you would be just selling them chips, there are no values.

no constraints which come with setting chips. You can just do whatever you want on it. And I think that's again where it's missing this tech set component. And we kind of got it right in the UAE. Sell them the cloud, let Microsoft build here. Versus here we just sell the underlying component. They can build whatever they want on top of it. And I think that's just missing in the debate.

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The application deadline is August 28th. Check the show notes for a link to learn more and apply. I think this is a key aspect to the export control debate, which is fascinating a lot of people don't get, which is that if you restrict sales of tools, then you hurt the toolmakers, but you help the users of those tools. And so in the chip industry,

if you sell fewer lithography tools, it's bad news for ASML, but it's actually probably good in the long run for DSMC and other companies that face less Chinese competition. Similarly, if you sell, GPUs to China, it's bad news for GPU sellers, or it's good news for GPU sellers,

but bad news for USAI firms who face stronger competition. And so one of the kind of strategic questions is, which level do you try to cut off? And the US has, I guess, decided until recently cut off at multiple levels and is now shifting, well, I guess we'll see where we are next week.

But this week, it seems like it's shifted towards a policy of sell the GPUs, but keep the controls on the chip-making tools. Which makes sense, right? Like, if we would like reverse selling them extreme ultraviolet photography machines from my SML would be way more a rampage than selling them AI chips, right?

And I would also complain more if we start selling them Blackwells over 20s. So I think that's a fair debate we should be having here. People can fall on different types of positions here. And again, we can disagree on some arguments here. And like, again, yeah, and then you have like these different types of controls

which stack with each other. And the eye chips are the first ones to fall. I think that makes sense. So one of the arguments is that if you make China addicted to AI chips, you gain long-term leverage. And I think like the mental model that people think of here as well, if you get them using UV lithography tools, they don't have their own ecosystem and it takes a decade to try to replicate your own tools. So maybe this is going for Leonard. Does the same dynamic hold here or is or if not why? What are the differences? Yeah, I guess there are many different facets

to being addicted to something, right? I mean, in the ideal case, it just means all Chinese firms are like really reluctant to adopt Chinese chips, right? And therefore they have less revenue, Smick is wondering, nobody wants to buy their chips and instead all the Chinese are just buy US chips. I already talked upon how just like Smic and Semic

and semiconductor gets anyways independent of AI, right? But it's a fair thing to say, like the less people use like Huawei's AI software ecosystem the versus this. I think that's a fair argument. and 2B8. I just think they know they want to produce it anyways.

They just know we need our own AI chips at some point. They're not full steam on this. I think they could go strong if they wanted to. Maybe they're full steam on it, but they just don't do better for many reasons.

So like them using the US tech right now, I think like maybe delays it to somebody even subsidize it. Let's just think about, I don't know, Volkswagen, you know, my German heritage, they love to sarcastic China. How's this going right now?

Did this stop B.D? Not really, right? And I expect like the share folks, long as being sold to China, right? And the future will be low. The argument to be made here, they made a ton of money in the meantime. And I think that's a fair argument to be made. The reason why I just feel nervous about AI chips is,

will you supplement, you'd like increase the total compute, deployment, training capacity in the time? If, again, let's just say, AGI is a singular point, AI is just not going to matter the nice five years, then all we discuss here doesn't matter that much, right? Because the good thing about AI chips is they get exponentially better. We're not going to talk about age 20s in five, six years, six years from now because we have exponentially better chips already here, right?

So I think that's an argument. We can just say like, don't worry, man. We just sell them. We make some money. They get a little bit bad AI, but AI is not going to be decisive in the next four to five years. But then later, ideally then later we stop it, right? And we don't sell them. We have like better chips that are like exponentially better.

Again, it goes back. Where do we draw the threshold? And when and how does AI matter, which is a diffuse question, right? And I have a pretty uncertain for you here. I'm just like, man, AI could be a really big deal in the next three to four years. It seems likely it's going to be a big deal, bigger or less big, right?

Depending on how it goes. From just like transformative economic growth being like determined the future of the military up to just going to fizzle out. Right? And I think we should address this uncertainty here. I just work on national security risk and I'm trying to minimize downside risks, right?

And I don't see the benefits here in the long run that why we should sell them. So fair argument. I think there's some good arguments here. But of all, I think it doesn't cut it at least for me. When you look at some companies, like, it's a really big deal

having Chinese market access. Like, Nvidia, excuse me, like Intel, like 35% of their revenue is selling CPUs into China. This was a big deal for the tool manufacturers. Like, you know, in some years, it was 30, 40% over the past few years. Nvidia is a $4 trillion company.

Like, they will be just fine. And still be able to deliver you that exponential curve of rapidly improving AI chips even without you know the extra $10 billion of sales I mean I guess you know there's like the maximalist version of this question of like

okay like you are 100% sure that AI is not matter does not matter and is not a sort of like strategic technology then yeah sell it you know go crazy do whatever you want with it but it is it is a it's like a it's a tricky line of thought where like, A, you know, we're writing an AI action plan where we want to make AI dominance.

We think this is going to usher in a new golden age. But we're willing to like take some of this downside risk that we're making it easier on a China, which we've identified as a like major strategic threat in order to, I don't know what. Make some money. We're still. Yeah. Well, it's like, it's like, okay, so if we, if we do think this is a big chip, like there is a broader context of the relationship that you can try to trade things in, right? And say, you know, we wanted them to scuttle some submarines or, you know, stop messing with the Philippines or, I don't know, there's just, there are lots of other asks you can make from a sort of like.

like balance of power, regional dynamics perspective, that you could have put on this. And it's kind of wild that it didn't even seem to be in the context of the debate, of the sort of discussion between the U.S. China trade deal, but was just like a decision that Trump made independently because Jensen got to him and we wanted to have,

like, good vibes in the relationship. and the 15% tax we're putting on it, I mean, is it just going to, like, pay off the national debt? I mean, what if it went to, like, buy drones for Taiwan or to sort of shore up, you know, go into funding BIS so they could do a better job of tracking down all the chips that are getting leaked out into China? You know, there are some sort of lines of this

where if you really are going to follow the, like, okay, like, we're all right with the premise that, like, China is a strategic threat and we got to kind of watch and hopefully shape just how much they're going to gain on the US from a relative technological competition perspective.

There are other moves you can do to make it more to sort of like use this card more in your favor than just like letting the other side pocket it. I think John, that's an excellent point right?

We would just have more insight here. because what we've seen so far is the H20 got sold again then post hoc somebody said it was part of the trade talks others denied it then the Chinese came out denying it was part of the trade talks right and eventually

what I don't like about it Xbox world was always a national security thing right when the diffusion framework came out and there were certain countries like Poland Switzerland in this tier two many were complaining like you're dividing a European trade union but it's a national security thing it's not a trade deal we're doing here

here. This was at least where Xbox McDonald's originally came from, right? And now we're mixing them with this trade things. And now we get 50% of the revenue share. And amazing, let's pay off the debt. Let's do other great things. I don't think national security is for sale here, right? If we would get like other national

security concessions here and return, that'd be amazing, right? It would just be nice to hear more and communicate about this. There's definitely things where like people like me and others are willing to walk back, hell yeah. Let's sell in age 20 because we got a beautiful deal out of it. I just don't think 15% of the sales is makes the cut here.

Just money doesn't help you. They get the computing power. You make money. You might even make more money because there is Nvidia making money and maybe Microsoft or your favorite hyperscaler in between, why you still have more control and more leverage, right? So I still generally think,

I think many just missed the point. You don't need chips like in your basement to run them. You just access them remotely. And so they could literally dial in, they could dial in our beautiful new UAE 5 gigawatt cluster or dial in in the US and like existing cloud providers. And then in the future, a case they go rogue, or you really want to make sure it doesn't go to certain military-linked entities,

use they have way more leverage, right? And I think, like, if we do the concessions, we talked about the different things you want to walk back. Before you sell chips, just tell them you can use the cloud, which is, by the way, perfectly legal as we're speaking right now. So if they really want to the computing power, use our cloud. It's still legal. You can go for it.

We still make money. So I think it's just putting a liquidity dynamic here, which Leonard, I think you're referencing, which is, you know, getting back to if you sell the tools, you enable the chipmaker, if you enable chip makers, that type of competitive dynamic. And what we've seen is GPU sellers, Nvidia, I think, most prominent, be very vocal on this issue. We haven't seen hypers be vocal at all, even though I think one should conclude this implies more competition for them. And then we've seen mixed responses from AI model companies.

I think Anthropic has been pretty vocal opposed. I haven't seen OpenAI. And so it strikes me that companies that have a lot of stake have been taking very different strategies, some being vocal, some not. I don't know what exactly explains that. More observation. I got an explanation.

Go for it. You know which GPUs they're all using and videos. And if you speak out against them, Jensen's going to get you. Right. So if you look at Amphropic, who's like slowly migrating to like more Google TPUs and Amazon Trinium,

you can see the deals. They can speak out against it. where everybody else is like reliant on Jensen. And I can at least confirm for many conversations with many people in his companies, the only competitor here is AMD, right? And I think it's only going to be, the market share for me, VD is only going to go downhill from here.

Right? The total market will go up. AI is a big deal. But AMD is getting better. Google GPU is getting better. Microsoft chips is getting better. Amazon chips getting better. We have more and more startups getting better.

Right. We just have way, way more AI chip competition. I think like Nvidia is also like slightly nervous on all of these issues. And I think I would love to live in a world when they had a smaller market share and see what the hypers and the AI companies would say.

And I think many of them would actually come out. And Open AI at least came out in favor of export controls historically when they talked about energy dominance and more. And I think right now they're all just all quiet because somebody else might then knock on the door. It's fascinating in the context of I've gotten lots of questions of what does industry think. And of course, you know, what you're saying is,

well, which part of industry are you looking at? Which segment, which specific companies? Yeah, fascinating political economy there. Why don't you do the HBM political economy? This has apparently been reported that the Chinese government is asking for a bandwidth memory as part of a concession number two. Maybe like, what would that, what does that tell you, Lerner? If I'd be running China, I would ask for high bandwidth memory over asking for H20s personally, right? Because I've got my sovereign drive anyways, I want to build better and better AI chips.

And if I look at my current AI chip industry, I would like to want EUV, but maybe this is too much to ask for, right, because we did this early on. Trump did it back in the days. But what is the thing we've only recently done is banning high bandwidth units, right? So we got our chip, and next to the chip we put like the memory, and these memory units being produced by Samsung and SK Heinex and Micron. They're not allowed to go to China anymore, right? And we've seen reporting that at least the Chinese, again, the Chinese put forward,

could we trade HBM? Is that like something we can do here? I hope the US government will draw like a clear red line here, right? We talked about how you would walk back things. There are arguments in favor of setting their chips. We talked about them. What we do here is not selling them our chips. What we do here is enabling them building better chips.

The best way how the 910C or the 910D, whatever the next chip is they produce will get better is by having higher bandwidth memory. And right now, China does not have the capacity to abuse even HBM3. There is reporting about first trial production of HBM3. In contrast, invidient Arrows are starting to equip HBM4 and using HBM 3E right now.

So again, don't you wrong, China will get better, they will eventually produce high bandwidth memory. There's lots more to be done. They could stop them from producing better memory. But in the meantime, while they're like scaling up this production and trying to get better at least, we should probably not sell them our high bandwidth memory to make their chips more competitive

because we might regret this in many years when we then competing across emerging markets and Huawei has a better chip, which can better compete with our chips. And the interesting dynamic, the memory space, is that two of the three producers are not US, but Korean. Indeed. That's also why we see probably tons of smuggling here

because it's pretty close by and there's like certain tricks to get more HBM. So don't get me wrong, I think China smuggling HBM right now, which is for sand in the gears. But again, I'm in favor throwing sand in the gears. And ideally, we get better enforcement. So, yeah, they get less HBM eventually. Should we switch to the political economy of this in China?

So July 15th, we get the news that the Trump administration is letting Invidia start to sell H20s. A week later, MSS publishes a notice to the public saying to beware of digital spying via Ford and produced chips. Ten days later, the CAC, the Cyberspace administration of China, summons Nvidia representatives over risks of being able to control A Chinese remotely and accuses them of having a kill switch in them. Then we have a private leading cybersecurity research firm in China. Chi Anzian, they publish a report which goes viral talking about all the ways that there could be backdoors. And 10 days after that, so just three days ago, August 9th, we have state television doing a whole big report talking about how there might be backdoors already in these age 20s. And they cite a former China Talk guest, Tim Fist, CNAS report, on this topic,

which he came on to talk about on China Talk a few years ago. So you're welcome. I don't know. Chris, what's your read on this, like, kind of interesting brusback pitch we've gotten from the central organs about age 20s in China? So I think there are three potential explanations, not mutually exclusive. One is that the Chinese security services are paranoid. And the discussion in Washington of the CHIP Security Act, which would mandate geolocation verification,

which has been happening simultaneously to the H20 debate, has intensified those concerns. That's explanation one. Explanations two is that it's part of an effort to discourage the private Chinese tech firms from using H20s, and that there are people around. in Huawei or in the government who are afraid that H20s will actually take into the market share, and so this is a way to say buy more Huawei chips as well.

And then I think the third explanation is that this is actually pressure on U.S. firms like NVIDIA to say, actually, we need you to do more or else we're not going to let you back in the market. And we've seen this in other segments of the tech sector where China will ramp up pressure on a private U.S. firm with the aim of having that firm then try to use its resources to shift the debate in Washington, You could maybe envision the HBM debate being part of what China is looking for, the broader trade negotiations that are underway. But it certainly wouldn't be a very attractive endpoint for NVIDIA if they got approval from the U.S. side, then didn't get approval from the Chinese side to sell.

So perhaps China thinks it has some leverage there. How exactly to kind of attribute these three causes? I'm not exactly sure what the shares I would put on each of them. But they both seem, or all three of them, seem potentially relevant. Do we talk about, they also put out guidance a while ago on energy efficiency? This was actually shortly in April or May when the H20 was a lot. No, sorry, even before. So when the H20 was the result before it got banned initially,

they put out guidance that the H20 is famously pretty energy inefficient if you look at flops, right, because of the Xbox control bandwidths. And basically, I don't know exactly what this guidance means, but basically discourages companies from using it. I guess nobody's been following it because, not at buying it in the world up in the single millions. This chip, but I think it feeds into the same narrative here, right? Just like you try to push certain companies or you create artificial demand for like some

Huawei chips and like slowly tell them like, hey, guys, at some point we want to do our own AI chips, right? And I think as Chris was saying, I think all of these stories are simultaneously. True, right? I think it all just makes sense. And there's like no big downside for them to do these kinds of things, only benefits. But actually there's a state media source. I don't know if you're referencing Jordan, but one of its criticisms of the age 20 was that

it was environmentally unfriendly. Yeah, no, they cite this exact NDRC line that Leonard talked about how the goal is five tarflops or half a tarflop per watt and the H20 can only give you 0.3.7.

It's pretty bad. Pretty environmentally unfriendly for training, but pretty damn environmentally friendly for deployment of AI chips. Way better than any Huawei chip. I can tell you that. I mean, I think like here's a moment where some mirroring might be in order. We've just had an hour-long conversation about how messy and convoluted

and sort of like how many conflicting priorities we have in American policy towards artificial intelligence. And like the same thing is happening in all these different ministries in China. And, you know, this is big news. This is like a change in the landscape. And people want to, you know, people want to have their say and make their stamp on it. So you don't necessarily need to sort of like attribute. some like 4D chess of like, oh, now's the time to squeeze them. But like, I'm sure the people in the MSS read Tim's thing and are like, oh, this would be really stupid if we bought all these chips only for them to turn into, you know, bricks or like spy on us or like have bombs in them that are going to blow up like beepers in Lebanon or something.

I'm sure folks in KAC feel the same way. And then, you know, the same debate that we've been having for the past hour of, oh, is it sort of like net positive or net negative for domestic self-sufficiency, like to have a sort of competitor to Huawei potentially take a big chunk of the market domestically is something that's being played out in China. So I agree with you that, like, at a broad level, now is the right time to ask for more stuff from Nvidia. that now that they've gotten the green light

and there is this kind of, you know, $10, $15 billion of demand and these chips sitting on a lot somewhere in Taiwan that they're really excited to ship out to say, hey, you know, you better step it up or cut the price or, you know, do an extra screen to make sure there aren't any kill switches on it or whatever.

You know, the way this is playing out on Twitter is, oh, China's saying they don't want them. That means we should definitely sell them. I don't think it is necessarily dispositive just reading that Chinese state media or state organs or saying something means it is true. I mean, it's not that hard to play the, let's not even give this credit for 4D chess. This is just 2D chess of saying, oh, no, we're worried about the chips. We don't even want them chips. That changes the political economy of the debate in Washington, where it makes selling these chips potentially easier to go down.

So that's also something to watch out for as we see the Chinese government saying, ah, no, we didn't really want these all that much. This isn't actually a big concession. We're kind of worried about the second order effects of this. But the fact is people, like, the demand is not going anywhere. Like, it's not like Alibaba's not going to buy these chips because of these sort of warnings, I think is the main thing. And I think Alibaba would be pretty sad if they suddenly only need to rely on

other inferior chips where they can't produce enough of them, right? Like, ideally, again, if I would run the Chinese government, I would, like, put out so many regulations that I can sell all of the Huawei chips I can produce and then fill the rest with, like, some nice embedded chips here. But I think also what's interesting. I think there's just some misunderstanding of what the chip security act is supposed to do in location verification.

The idea is not to check it for chips. Well, the idea is to check it for chips in China and then we have a problem, right? So the idea is, like, we put this tracker on a chip in Malaysia, Singapore, wherever you think they'll be smuggled and then check they don't end up in China right? So this was never supposed to be go on chips which go to China because ideally we don't have any chips going to China

at least not the advanced ones, right? So this is an interesting confusion right, like this whole debate of these hardware-never mechanism location verification was big in the UAE and Saudi Arabia and Singapore and Malaysia for all of these smuggling hotspots which people were worried about and again

I think some people have been pushing and I think if you think about, if we now stop selling chips, I'm arguing we should sell them cloud. That's one line before. People got to say, we can sell them chips, but put something on the chip, right? But like, just knowing a chip is now in China, and we know it's in this location and this city over the,

how does this help us again here? Right? Again, like, and then everybody can dial in remotely, even if it sits at Tencent, who says that the PLA is not using it, right? You can just dial in remotely. So I don't know what's going on there.

If there's some misinterpretation of documents, just some vibes, it's a confusing status. Jordan, you previously made a point about Intel, which I think is an interesting one. We were like saying, like, Intel made a lot of money in China, right? And Intel is still allowed to sell their CPUs, and Intel's CPU share in China is only going down, right?

And I think we will see the same with Nvidia and AI chips, basically. Even if you're allowed to sell, your share will potentially go down. Why is this the case? There is similar guidance, for example, for all government computers, to go to homegrown domestic-produced chips. We can't trust. Intel any more on this, right? We will see the same on AI chips. So yes, Intel made a lot of money in China, but the share is going down over time, and they're pushing on the self-reliance,

basically, to produce their own AI chips. And they also named security concerns here, right? That's why the government is coming first. I don't know the exact numbers of Intel sales right in China and how much money they're making there, but I'm pretty confident it's been going down, and the government is not buying any more Intel chips because they just put out this guidance here. So we've seen this playbook playing out before, right? The only difference is now, we have this confusion with which ships are allowed to be sold, which ones are not to be sold, and how good are they actually, right? But the story is nothing new. Could we talk about what we know in terms of the big buyers of AI ships in China and their

relationship with the state? So you've got the private, you know, quote-unquote private tech firms, Baba and Tencent. You've got the AI labs, you know, Deep Seek most prominently. I don't know what Leonard Jordan, which you have a view here. But one of the key questions it seems to be how, what is the relationship with the state today and how is it changing? And to what extent should we see them as, you know, arm of the state is certainly not accurate. Totally independent is certainly not accurate. There's a spectrum. And so to what extent are these political priorities shaping their procurement decisions?

Look, there was reporting, which was clearly sourced by the intelligence community over the past few years, that after the MSS hack of the SF86, so that's the form you submit to the U.S. government when you want a security clearance, which talks about, which basically like you try to, you know, it's your like confession of sorts to the Catholic Church where you talk about all your divorces and all your debt and everything, you know, that a foreign intelligence community

might want to know about you, that that data was actually, that the MSS tapped Alibaba and, by Dantz engineers to sort of like put into a more useful format. So like we've just seen over the past few weeks reporting from Business Insider about a public tender from some corner of the PLA that wanted H20 is to like do whatever they wanted to do with it. I used to be more sanguine on this type of thing. but I think there's again this is like the most

this is the dual use technology to like beat out other dual use technology so it just seems to me to be like a little preposterous that like insofar as this is a strategic resource that the Chinese government would not be able to leverage you know

data centers that are living in China that the US did not have any sort of kill switches or on-chip governance on in order to do whatever they want to do with it, whether that's, you know, build a surveillance system or help with weapons manufacturing. And to be clear, like, you know,

the Pentagon has now signed, like, I think it's like a $200 million contract with Open AI. And that, this is just the beginning, right? So, like, clearly this stuff is useful that we're willing to pay a lot of money to, like, get it into the Pentagon and in one form or another. So if what we're sort of convinced with,

if what you find what Lennar says is convincing is that you're selling a lot of age 20s like materially raises the amount of sort of like usable functional compute that can be put into anything in China, it would be really surprising for me if you didn't have the Chinese government want to take out these new toys for it. If you didn't have this sort of

Chinese like military police complex want to take these new tools out for a spin. So I think there's kind of two two points you can analyze. One is if AI tools exist, will the military use them? And I think obviously the answer is yes there. But if you're a data center procurement official

or executive at Alibaba Cloud, to what extent is your decision making there shaped by what you read in state media versus what your boss tells you to build an effective cloud, in which case maybe age 20s are your best option versus ascends. How do we think about, because those are the people who are going to decide how many a cents to buy, right? Unless they're getting a dictated,

we maybe are from the top. I guess the sort of counter example I'm thinking to myself is, you know, there was a time when parts, maybe still, I don't know, parts of the U.S. military were using Chinese drones, not because there was a policy to Chinese drones because they didn't have any U.S. drones. And so is there a scenario in which, like,

your procurement executive at Alibaba is, it's just going to ignore the sentence because they were told to build a data center. Yeah, I think, I think at some level, yes. I mean, these are companies that report quarterly earnings that pay their employees based on how well the company performs, right? And, you know, people get stock options. So I think by and large,

the incentives of the people who are buying these chips is to drive the most revenue for the money you're spending on your CapEx. But, you know, it only goes so far. And I do think that there is this sort of broader strategic realization which you don't even, which you don't need Beijing to tell you, right? Is that this is like a, this is, you know, this door can be closed at any time.

And I think both to it's close to it already So you know Yeah I mean I think I think maybe now is an interesting moment to sort of talk about

the sorts of things that could change the dynamic We're on now on chips And sort of on the broader U.S. China relationship I mean we have Congress

as a variable There have been a number of senators and Congress people who've been like Wait, what are we doing selling these chips to China I thought we banned and said we're, you know, um, uh, you know, our,

our, our, our, our, our, our, our, our, our, our, our, our, our, our, our, our, our, our, our, our, our, our, because Trump is doing this at such a personal level, like, we've seen him turn on Putin, right? And I mean, we've seen him gone from, gone from like, all Putin to like, we're going to ask some questions about this guy. And, you know, we'll see what the hell happens in, in Alaska. But I do think that there. there is like Jensen saying the wrong thing, taking too much of a victory lap, or, you know, she doing something really obnoxious.

I mean, there's, there are a lot of sort of like personal, interpersonal dynamics that could change what the, what the Trump administration ends up doing, which is like probably the more relevant variable than like whether or not Leonard can convince you that Huawei can only make X amount of chips. Exactly on that. Yeah, yep.

It's an interesting moment of time because we just have all of the trade negotiations, right? So everything is like volatile and it's just like certain things are just on the table and they'll be willing to discuss them, right? And we see the Chinese bringing forward, at least the country reporting, the idea of HBM, right? And it will just be interesting to see what the government is going to say and it's going to draw a red line. We had statements before the trade negotiations in London that H20 is above the red line, right? So they wouldn't negotiate it. And again, we can all try to put together the story what happened to you or whatnot if it's part of it.

We won't know for sure, right? But it will be more discussions about these kinds of things. The Chinese can bring it up. But I'm also more interested in the semiconductor manufacturing equipment companies. If InVidio got this beautiful deal, I know what you're doing. They're all trying to give the president and elsewhere ring. And it just seems like it's a handful of people who are making these decisions. And I just hope they're well informed of which things are more important, right?

if I see any news about EOV machines being sold to China I'm probably going to get a heart attack and I just really don't want to say him. I mean I think just from a personal transaction perspective like there isn't someone in the semi-cap equipment ecosystem

that Trump's going to give the time of day like he felt like he had to with Jensen because you know this is like America's most important CEO. I don't think any of those folks have the sort of like panache and skill to make it work. And even, you know, Ben Thompson,

who I gave a hard time for earlier in this podcast, understands very clearly that there's a lot of downside risk in selling more tools to China than we already have. I would go even so far. It wouldn't be good for Jensen if Huawei's not good at producing AI chips, right? So it wouldn't be in the interest to say like,

hey, yeah, yeah, let's make sure we set them all chips. So really let's make sure to hit them on every single dimension we can to make sure Huawei is just less competitive, right? I would love to see that. This would be at least a good part of the story here. I think going back to Congress, I think Congress will be interesting to watch on this issue. Because the trending Congress has been,

Congress has vocally pushed for tougher controls, both in the first administration and under Biden, not universally, but I think that's been the predominant push. And so now I think we'll be interesting to watch Senator Cotton, for example, and what he does or does not say publicly on this issue. Chris, do you want to sort of tie the, you know, tease out the Russia comparison a little bit?

I mean, Congress, like, really not happy. They ended up putting some sanctions on the table. What was the, what have the dynamics been there over the past six months? Well, I guess the last six months in Russia have seen Congress officially not play much role at all. put sanctions legislation on the table and then pulled it back, actually, if Trump requested it. But I think I would say there's been a number of Republican senators who have been influential in shaping Trump's thinking. Lindsay Graham, for example, seems to have played a role in shaping

Trump's thinking on Putin over the last six months and the way that Putin is stringing along. Now, you know, we're going to Alaska later this week, and so maybe all that will prove irrelevant if Trump changes his mind. But it does seem like you could argue that even though Congress has done nothing on Russia, in fact, it, it, it's, it. has helped change thinking in the White House. I wonder if the same will be true here, but this seems like a place where Trump's going to make more of his own decisions, especially as far as it intersects with the China trade negotiations,

which just seems like it may well. Yeah, and it's kind of a less salient thing than a land war. There's no domestic constituency. Yeah. Yeah. Just weirdos, tech national security podcasts. Other stuff we should get to? Leonard, do you have anything to say about the, because before this week it was reported that

Nvidia was coming out with a downgraded version of some new downgraded chip post-H20, but I guess that's now irrelevant. Oh, yeah, yeah, the B-40 or B-30, I think. Yeah, yeah, yeah, yeah. That's not irrelevant because of the age 20. It's unclear, right? If people, we flip-flop the decision on the H-20, but notably there is still a license requirement, right? So, in VDA got a license granted.

So if they wanted to go all the way back, they could have removed the license requirement, right? So from October 2003 to April 2025, there was no license requirement. Then they introduced the license requirement, which is still intact. The only thing which happened as of speaking last Friday is they granted the licenses according to reporting rate. So if they still want to set a chip which is not subject to Xbox controls, they would produce a new chip called B30B40. It needs to be lower the computational power threshold, so the same as stage 20. and also have lower memory bandwidth.

And according to the reporting, I think FT leaked what is in the ESM formplata needs to be less than 1.4 terabyte per second memory bandwidth. Again, the H20 is at 4 terabyte per second, right? So the B40 would then probably not use HBM anymore, but probably used to like an inferior memory technology, but significantly cheaper because why use HBM if you can't have their many memory bandwidth anyways,

so-called GDR technology, which we usually use for graphic GPUs. And again, if, people talk about this is only the fourth best chip, I don't think the H20 is the fourth best chip. I think the B30, B40, that's a more fair description of a fourth best chip. And I would still not call an obsolete chip, but it's definitely a worst chip. It's only like, you know, with a chip where, like, again, the US government at least decided, here's where we draw the new lines.

This ship is fine to be exported without a license. So it could still be coming. I have not heard they stopping the production yet. I guess Nvidia's making a calculus right now on how much demand there is. But it's clear the K-stage 20 is better. The question is, will all the licenses be granted going forward, right? And Trump has said, or he said at the press conference a couple days ago, that he'll consider a downgraded Blackwell.

Are there ways we should think about what that might look like if, in fact, a material materializes, of course, with huge questions over whether or not that's actually real? One thing which stood out, he said like 30 or 15 to 50 percent less performance. And I think what many people are just missing on AI chips and computing, chips get exponentially better. If your chip is 15% less, that's nothing. That's still the same generation, right? So if you really want to sell worse chips, you need to go back a few generations, and then the chip needs to be like seven times worse, not only 50% or 15%.

Right. So there's an argument to be made that you want to sell worse chips, but it's not a little bit of a downweight. We really need to take the exponentially into account, right? If we trim down a blackwell chip, for example, a B-200 by 15 to 50% still like twice or three times as good as the Huawei chip, right? And again, we can produce millions of them while Huawei struggles, according to reporting, producing 200,000 this year. So again, that's just a key thing to get right here.

And yeah, people keep in mind the exponentials here, right? Like chips get exponentially better. A 15 to 50% trim is nothing in the grand scheme of things. and I would at least, yeah, make my voice heard to say, this is probably not a good idea of what should be doing here. The government, two lines before, and the lines are way lower, and I think that's where it should be. All right.

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