Good news is coming! NVIDIA H20 shipments may resume, and these AI supply chain companies will benefit

According to the Zhitong Finance APP, Bank of America’s Global Research Department believes that NVIDIA (NVDA.US) may restore shipments of H20 to China in the second half of the year, which will have a positive impact on major semiconductor companies in China’s data center, public cloud industry, and artificial intelligence supply chain, such as Lanqi Technology (688008.SH).

According to NVIDIA, its CEO Jensen Huang updated clients during his visit to Beijing, confirming that NVIDIA is submitting applications to resume shipments of H20 GPUs to China, and it is expected that the U.S. government will grant the relevant licenses.

Jensen Huang also announced a new compliance RTX PRO GPU, which is tailored for smart factories and logistics.

Bank of America believes this will have a positive impact on major semiconductor companies in China’s data center, public cloud industry, and artificial intelligence supply chain (such as Lanqi Technology):

1. China’s Data Centers: The speed of customer onboarding may accelerate, and new orders may increase;

2. China’s Public Cloud: AI-related public cloud services may achieve faster growth;

3. Lanqi Technology: Increased domestic shipments of PCIe Retimer are expected to drive revenue growth.

1. Data Centers: Recent Customer Onboarding May Accelerate

If the U.S. government grants H20 shipment licenses in the near future, a large number of orders that Chinese internet companies and cloud service providers (CSPs) have accumulated for months are expected to be quickly fulfilled with NVIDIA's inventory (previously delayed due to licensing restrictions). Therefore, major data center tenants (i.e., service providers and large internet companies) may soon obtain more GPUs, which could accelerate their server onboarding speed and potentially enhance the utilized capacity of GDS and VNET in the third and fourth quarters of 2025 (both rated as "Buy").

Bank of America believes that the launch of NVIDIA's new compliance GPU can significantly reduce the supply uncertainty faced by Chinese customers, which may support Chinese cloud service providers in resuming data center orders starting in 2025.

Additionally, as recent pricing valuations of Real Estate Investment Trusts (REITs) have risen (see our report from July 7), the alleviation of GPU supply uncertainty may also trigger a re-rating of the industry.

2. Public Cloud: AI Cloud Service Revenue Expected to Rise

For public cloud service providers, the supply of NVIDIA GPUs can help them gain more AI computing power to meet downstream customers' needs in model training and inference, which may lead to growth in their AI-related public cloud revenue.

Lanqi Technology's domestic shipments of PCIe Retimer have increased. Lanqi Technology (rated as "Buy") recently issued a profit warning for the second quarter of 2025 (see subsequent report), and its emerging products (including PCIe Retimer) have seen steady increases in shipments. PCIe Retimer is a key component in AI servers, used to maintain signal integrity and achieve high-speed communication between components such as CPUs and GPUs. Therefore, the potential restoration of H20 shipments and the launch of new compliance GPUs for Chinese customers may increase the shipments of AI servers in China This will further drive the growth of domestic PCIe Retimer demand.

Table 1: Ratings and Price Summary of Mentioned Stocks

III. Basis for Price Targets and Risks

GDS Holdings Limited (GDS.US/ XMJFF)

Bank of America has set a target price of $44.0 / HKD 43.2, based on the following: 1) The valuation for the China business (GDSH, 100% ownership) is based on a 12-month forward enterprise value / EBITDA multiple of 15 times, which is the average for publicly listed data center REITs in China; 2) The valuation for the international business (GDSI, 35.6% ownership) is based on a 12-month forward EV/EBITDA multiple of 25 times, reflecting its faster growth trajectory, which is a 10% premium over U.S. peers.

Upside Risks: (1) The pace of domestic backlog order advancement is faster than expected; (2) The pace of overseas expansion is faster than expected; (3) New government policies provide support for the data center industry.

Lianqi Technology (XRDFF)

Using the discounted cash flow (DCF) valuation method, the target price is set at RMB 96, with a weighted average cost of capital (WACC) of 9% and a terminal growth rate of 3%, corresponding to a projected price-to-earnings ratio of 45 times for fiscal year 2025 and 36 times for fiscal year 2026.

Upside Risks: 1) The penetration rate of DDR5 memory is faster than expected, or server shipment growth is stronger than expected; 2) The contribution of PCIe Retimer to revenue is higher than expected; 3) The recovery of the Jinzhai server platform business is stronger than expected.

Century Internet Group (VNET.US)

The target price is set at $11.3, based on a 12-month forward expected EV/EBITDA multiple of 14 times, which is basically consistent with the valuation of publicly listed data center REITs in China.

Upside Risks: (1) New wholesale order growth is faster than expected; (2) The pace of utilization level improvement is faster than expected; (3) The launch speed of artificial intelligence business is faster than expected