Nvidia Deal With TikTok Owner Could Drive Its Stock Higher

Key Points

• TikTok owner ByteDance has started to buy Nvidia chips for its AI applications. That will help the U.S. company.
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The Financial Times reports that TikTok owner ByteDance wants to be the leader in AI in China. It has begun buying Nvidia Corp. (NASDAQ: NVDA) chips to do so. This new market and major customer could be a catalyst for driving the U.S. chip company’s stock higher after what has already been an extraordinary run.

Due to limitations placed on China sales, Nvidia can only sell ByteDance chips that are less powerful than those available in the United States and throughout much of the world. These are called Nvidia’s H20 chips. However, the Financial Times says the Chinese company can buy the more powerful H100 and Blackwell chips for data centers it owns outside the United States.

Chinese companies, including Baidu and Huawei, have started to build their own AI chips. This is mostly because the U.S. blocks the exports of Nvidia’s most advanced products. However, it is hard to say whether these chips can be competitive, which may be why ByteDance is acquiring Nvidia chips for data centers outside its country.

China’s companies continue to try to catch up with the United States in the AI sector. If it can’t, the United States will continue to lead significantly in business and military applications.

Nvidia may find demand for its most advanced chips is limited enough by demand that the ByteDance move into the sector will not improve its fortunes in the short term. However, Nvidia is the only AI option for companies that want the best products in the industry. That creates ByteDance demand even if it cannot be fulfilled immediately,

Nvidia does not need more customers, but that does not mean it will not get them. Its revenue rose 94% in the most recent quarter to $35.1 billion year over year, and per-share earnings were up 111% to $0.78. ByteDance shows that if Nvidia can keep producing more chips, there is even more demand.

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