Nvidia is the only thing standing between the global economy and recession

Nvidia is single-handedly holding the global economy together. Forget oil or traditional industries, Nvidia’s AI chips have become the main engine driving multiple sectors worldwide.

The company’s CEO, Jensen Huang, said the demand for their AI chips is “insane.” The NVDA stock has seen a massive surge, closing 1.6% higher on Wednesday and doubling in value this year.

Nvidia’s chips are now essential to AI development, making it the dominant supplier in the space. Businesses in all industries are scrambling to build AI systems, and the company finds itself at the center of this rush. 

NVDA has accounted for 30% of the gains in the S&P 500 in the first half of the year. But the stakes are high. A dip in the NVDA stock could send markets spiraling.

US-China tensions pile regulatory pressure on Nvidia

While Nvidia is riding high, there are dark clouds on the horizon. The tension between the US and China is a big challenge.

China has been one of the company’s biggest markets, but that’s changing fast. Chinese regulators are pushing domestic companies to reduce their reliance on the American chip maker, especially its H20 chips.

You see, China wants to build up its own semiconductor industry, and Nvidia is a roadblock. Reports say Chinese regulators are guiding companies to use local AI chips from firms like Cambricon and Huawei. 

Beijing is trying to boost its own tech sector without causing a full-on economic war with the US, but Nvidia is suffering a bit because of it.

Its shares fell by 2.2%, and further drops are expected as the Chinese competitors gain ground. Washington has already banned Nvidia from selling its most advanced AI processors to China.

Nvidia’s response to these restrictions has been to modify its chips, allowing them to bypass US export controls. Despite this workaround, the restrictions are squeezing the company’s revenue.

Many Chinese-native companies, like 01.AI, Baichuan, Moonshot, MiniMax, Stepfun, and Zhipu, are developing large language models, which are used for generative AI.

Nvidia’s dominance isn’t guaranteed as these companies build up their capabilities. But one thing for sure is if it slips, we could be looking at a major global financial meltdown.