China scrutinizes Nvidia H20 chip buys, pushing domestic AI alternatives
Beijing has initiated a significant pushback against the acquisition of advanced artificial intelligence chips from Nvidia, demanding that major Chinese technology firms, including Alibaba and ByteDance, justify their orders for the company’s H20 AI processors. This move further complicates Nvidia’s already delicate business operations in China, despite a recent export arrangement struck with the US government.
Regulators, notably the Ministry of Industry and Information Technology (MIIT), are reportedly pressing these tech giants to explain their continued reliance on Nvidia’s H20 chips when domestic alternatives are available. This scrutiny has already prompted some of Nvidia’s primary Chinese customers to reconsider and downsize their planned H20 orders. As one Chinese data center operator succinctly put it, purchasing Nvidia’s chips has become “a politically incorrect thing to do,” even if not explicitly banned. Neither Alibaba, ByteDance, nor the MIIT offered immediate comments on the situation.
The heightened oversight aligns with Beijing’s broader strategy to bolster its indigenous semiconductor industry and reduce dependence on foreign technology. Chinese authorities have increasingly expressed disapproval of companies utilizing Nvidia’s chips for any government or national security-related projects. Reports indicate that notices have been dispatched to various companies, explicitly discouraging the use of H20 chips, particularly for state-affiliated work. This policy is already bearing fruit for domestic chipmakers such as Huawei and Cambricon, which have seen their market share expand following restrictions on Nvidia’s H20 sales.
Nvidia finds itself at the epicenter of an escalating geopolitical rivalry between Washington and Beijing. The US chipmaker recently agreed to a controversial deal, committing to pay the US government 15 percent of its revenues from H20 chip sales in China as a condition for resuming exports to the country. This arrangement drew sharp criticism from US security experts, who argued that such sales could inadvertently bolster China’s military capabilities and undermine America’s strategic lead in artificial intelligence.
Conversely, Beijing has voiced its own security concerns regarding Nvidia’s products, citing potential features like location tracking and remote shutdown capabilities—claims that Nvidia has explicitly denied. Amidst this complex landscape, former President Trump recently suggested a potential willingness to permit Nvidia to sell even more advanced AI chips in China, specifically those based on its cutting-edge Blackwell platform. Currently, the H20 chips sold to China are deliberately performance-restricted compared to the more powerful processors available to US customers.
The tightening grip from Beijing is expected to significantly reshape the AI chip market in China. Analysts at Bernstein project that Nvidia’s market share in China’s AI chip sector will decline from an estimated 66 percent in 2024 to 55 percent in 2025, reflecting the growing momentum of domestic competitors and the impact of regulatory pressures. This ongoing saga underscores the intricate dance between global commerce, national security, and technological supremacy playing out on the world stage.