In a nutshell: Just days after Nvidia stuck a deal with the US government allowing it to export AI chips to China, Beijing is urging local tech companies to avoid using Team Green's H20 GPU. Regulators want firms to justify their orders of these chips and explain why they are preferable over domestic alternatives.
According to reports from Bloomberg and The Financial Times, several big Chinese firms, including Alibaba and TikTok parent ByteDance, were asked by regulators from the Ministry of Industry and Information Technology (MIIT) to explain why they opted for Nvidia H20 chips instead of homemade rival products.
Bloomberg reports that Chinese authorities have sent notices to a large number of companies discouraging the use of the H20 chips. When asked about their purchase, one Chinese data center operator told The FT, "It's not banned but has kind of become a politically incorrect thing to do."
China's regulators are said to be putting most of their focus on companies and enterprises that use the H20 for government and security work.
China's actions are reportedly working. Some companies that were the main buyers of the H20 chips before their sale was restricted in China are now planning on downsizing their orders because of the regulators' questions.
In a statement responding to the reports, Nvidia said, "As both governments recognize, the H20 is not a military product or for government infrastructure. China has ample supply of domestic chips to meet its needs. It won't and never has relied on American chips for government operations, just like the US government would not rely on chips from China. Banning the sale of H20 in China would only harm US economic and technology leadership with zero national security benefit."
Chinese state media previously reported that the H20 GPUs were unsafe, outdated, and bad for the environment.
Washington banned sale of the H20, which is designed to stay below the US performance-density threshold, to China in April – a pause that cost Nvidia a $4.5 billion write-off.
The US government struck a deal with Nvidia and AMD this week that will see Washington take 15% of sales from AI chips sold to China in exchange for export licenses. It encompasses the H20 chip and AMD's MI308 chip, both crucial for AI applications. Nvidia had been expected to sell more than $15 billion worth of H20 chips in China and AMD about $800 million, so the deal could have generated more than $2 billion for the US government by the end of the year. But China's dissuasion campaign could see those figures drastically reduced.
Nvidia recently made a public post assuring customers that there are no backdoors, kill switches, or spyware in its products. The announcement came a week after China claimed the company's data center GPUs contained security and privacy issues.
China urges domestic tech companies to avoid Nvidia H20 chips
