Beijing questions Chinese tech giants on Nvidia H20 chip buys
Beijing’s regulators have intensified their scrutiny of Chinese technology giants, including Alibaba and ByteDance, demanding detailed justifications for their ongoing purchases of Nvidia’s H20 artificial intelligence chips. This move comes as a new layer of complexity in the already fraught US-China tech rivalry, particularly following a highly unusual agreement between the Trump administration and American chipmakers.
In recent weeks, Chinese authorities have issued notices and direct inquiries to major tech companies, seeking to understand why they are opting for Nvidia’s H20 processors over domestically produced alternatives. These questions also probe potential security vulnerabilities within the Nvidia hardware and whether such foreign procurement is truly necessary given the evolving landscape of local options. This aggressive questioning aligns with broader state media narratives that have expressed skepticism about the H20’s safety, even alleging the possibility of “backdoors” – claims Nvidia has vehemently denied. Such actions underscore Beijing’s dual objective: bolstering national security by reducing reliance on foreign technology and accelerating China’s drive towards semiconductor self-sufficiency.
The timing of Beijing’s demands is particularly salient given a recent, unprecedented deal struck by the Trump administration. After an earlier ban in April 2025, the US government green-lighted the resumption of H20 chip sales to China by Nvidia, and MI308 chips by AMD, on the condition that both companies remit 15% of the revenue from these sales to the US Treasury. This “chip tax” or “pay-to-play” arrangement, confirmed after a White House meeting between Nvidia CEO Jensen Huang and President Donald Trump, has drawn criticism within the US for potentially blurring the lines between national security policy and revenue generation. The US government defended the deal, with some officials suggesting it does not compromise national security, while others, including former National Security Council officials and lawmakers, voiced concerns that it undermines Washington’s strategic goals in the AI race.
Nvidia’s H20 chip was specifically engineered to comply with earlier US export controls, representing a “de-tuned” version of its more powerful AI accelerators like the H100 or forthcoming Blackwell chips, designed to limit China’s access to cutting-edge AI capabilities. Despite the H20 being a less advanced variant, Chinese tech behemoths like Alibaba, ByteDance, and Tencent had placed substantial orders, reportedly totaling $16 billion in the first quarter of 2025 alone, demonstrating their strong preference for Nvidia’s established hardware, software ecosystem, and networking advantages.
However, Beijing’s latest regulatory push signals a clear intent to steer these companies away from foreign solutions. While Chinese firms still favor Nvidia’s offerings over local alternatives like Huawei’s Ascend series, which generally lag in performance, the sustained pressure from regulators could compel them to accelerate their adoption of domestic chips. This regulatory uncertainty and the explicit questioning of H20 purchases may force Chinese tech giants to reconsider their supply chains and invest more heavily in homegrown semiconductor development, even if it means a temporary dip in their AI capabilities. For Nvidia, while the US revenue-sharing deal reopens a lucrative market, Beijing’s escalating demands introduce a new layer of risk and uncertainty, complicating its long-term strategy in a critical region.