China Says No to Nvidia AI Chips: Local Companies Must Use Domestic Alternatives

China's internet regulator, the Cyberspace Administration of China, banned domestic technology companies from purchasing AI chips from Nvidia on Wednesday. The ban applies to companies such as ByteDance and Alibaba, which are now prohibited from testing or ordering the RTX Pro 6000D server, a device designed specifically for the Chinese market. According to reports from the Financial Times, this means the immediate cancellation of all existing orders. Beijing had already discouraged these companies from making purchases in August and promoted local manufacturers, but it has now escalated this to an outright ban.

Impact on Nvidia and CEO's Response

The ban represents a major blow to China's technology ecosystem because Nvidia is the global leader in AI chips with advanced technologies. Although companies such as Huawei and Alibaba design their own AI chips, Nvidia remains at the top. Nvidia CEO Jensen Huang said at a press conference: "We can only serve a market if the country wants us to. I am disappointed with what I see, but they have a larger agenda between China and the United States. I am patient, and we will continue to support the Chinese government and companies as they wish."

History of Restrictions and Losses

The Donald Trump administration introduced licensing requirements for the sale of AI chips to China in April, affecting companies including Nvidia. During the first-quarter earnings call, Huang said Nvidia expected to lose $8 billion (CZK 180 billion) in the second quarter alone due to its inability to sell H20 chips in China. In June, Nvidia announced that it would exclude China from its future earnings forecasts because it had effectively been shut out of the market. In July, the administration allowed chip sales to China, but on the condition that 15 percent of the revenue go to the U.S. government. Despite this, Nvidia had not sold any units to Chinese customers by its latest earnings report due to the plan's slow implementation.

Shift Toward Domestic Solutions

According to additional information from Tech-ish, the ban also extends to H20 chips and applies to companies such as Tencent and Baidu. Regulators concluded that domestic Chinese AI chips now match or exceed the performance of these Nvidia models. This accelerates China's push for independence in semiconductors and AI. The ban caused Nvidia's shares to fall and is increasing concerns about a global technological decoupling between the U.S. and China.

Source: techcrunch.com