What just happened? China's push for companies to use home-grown AI chips has taken a surprising turn. According to reports, Beijing now mandates that any new data center projects that receive government funds cannot use foreign AI accelerators. The new rules also apply to current builds less than 30% complete, so Nvidia, AMD, and Intel chips already installed will have to be removed.

The Chinese government has issued guidance on the requirements that new or early-stage data centers use only domestic AI chips, writes Reuters, which cites two people familiar with the matter.
While projects under 30% complete will be required to remove all installed chips, or cancel their purchase orders, those at a more advanced stage will be assessed on a case-by-case basis.

Reuters notes that most data centers in China have received some form of state funding to aid their construction, with more than $100 billion being directed to these projects over the last two years.
Also read: Senate bill aims to restrict advanced AI GPU exports, prioritize US buyers
The sources added that it was unclear if the guidance applied nationally or only to certain provinces. Some projects have already been suspended before breaking ground as a result of the directive, including one in a northwest province that planned to use Nvidia chips.
The pace at which China has been encouraging local companies to drop foreign AI chips in favor of domestic alternatives has risen in recent times, partly spurred by the ongoing trade war with the US.
In August, following the announcement that Washington would take a 15% cut of sales from AI chips sold to China in exchange for export licenses, the Chinese government started urging companies to avoid Nvidia H20 chips. The country's Ministry of Industry and Information Technology (MIIT) wanted big Chinese firms, including Alibaba and TikTok parent ByteDance, to explain why they opted for the H20 instead of homemade rival products.
Unlike the H200 and B200, the US doesn't restrict H20 chips from being exported to China. But Chinese state media previously reported that the H20 GPUs were unsafe, outdated, and bad for the environment, and many companies use the gray market to acquire more advanced accelerators. However, China has ordered local firms to stop smuggling these restricted chips into the country.
The news will come as a blow to US chip firms, especially Nvidia, which at one point saw the Chinese market account for 20% to 25% of its total data center revenue.
China bans Nvidia, AMD, and Intel AI chips from state-funded data centers
