The Nvidia logo appears on a smartphone reflecting the flags of China and the U.S.
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Beijing has reportedly halted purchases of yet another AI chip from Nvidia, freezing it out of the market completely — a move industry experts say reflects the country’s growing confidence in domestic chip makers and an attempt at gaining trade leverage.
It was only a few months ago when Jensen Huang announced, from China, that the U.S. would allow it to resume sales of its made-for-China H20 graphics processing units, reversing a previous halt on their exports.
At the time, Huang had also revealed the company’s new RTX Pro GPU for the Chinese market, which had been tailored for AI smart factories and logistics.
But Nvidia’s fortunes flipped in August, when it was reported that regulators in China had begun mandating tech firms to halt purchases of Nvidia’s H20s pending a national security review.
Now that the mandate has been expanded to Nvidia’s RTX Pro 6000D chip, rendering the company unable to sell any products to Chinese customers, according to a report by the Financial Times on Wednesday.
That comes after Chinese regulators on Monday said that Nvidia had violated the country’s anti-monopoly law, as per a preliminary probe, adding they would continue their investigation.
While the exact motives of China’s actions against Nvidia remain unclear, tech and geopolitical analysts say the developments show China has become more confident in its own ability to make AI chips and is wielding that as a leverage against the U.S.
Another Nvidia chip crumbles
The reported reasons for Chinese regulators’ intervention in the H20 had been the need for a national security review over concerns that Nvidia chips could be outfitted with certain tracking systems — an idea proposed by American lawmakers.
Experts had characterized the move as part of Beijing’s efforts aimed at encouraging Chinese AI companies to explore domestic alternatives, though they forecast that exports would eventually be cleared due to high demand from Chinese AI players.
Meanwhile, some Chinese AI companies had indicated they would order tens of thousands of the RTX Pro 6000D, and had started testing and verification work with Nvidia’s server suppliers up until they were asked to cease such activities, according to FT’s reporting.
The country’s regulators, however, blocked access to those Nvidia chips after summoning domestic AI chip makers and concluding they had reached performance comparable to the U.S. company’s made-for-China products, according to the FT.
However, performance isn’t the only challenge facing China’s AI chips. Analysts contend that capacity is also a major barrier, with the domestic industry still unable to produce enough chips at scale.
Reporting from the FT suggests Beijing has also become more confident in this area, with local chipmakers seeking to triple the country’s total output of AI processors next year.
“All these recent actions show that China has much more confidence in their domestic sector than they used to,” said Qingyuan Lin, a senior analyst covering China semiconductors at Bernstein.
China’s chip progress
There are signs that China’s AI ecosystem has been progressing.
Chinese tech giant Huawei announced Thursday new AI compute infrastructure using its in-house Ascend chips, claiming they would be the “world’s most powerful.”
Research firm SemiAnalysis found in April that Huawei’s latest-generation CloudMatrix system was able to outperform Nvidia’s competing AI compute system on some metrics — despite each Ascend chip delivering only about one-third the performance of an Nvidia processor. Huawei built its advantage by having five times as many chips linked together.
Meanwhile, Chinese AI start-up DeepSeek had hinted last month that its latest AI model would be compatible with the country’s “next generation” homegrown AI chips. China’s Alibaba and Baidu have reportedly started using internally designed chips to help train their AI models, partly replacing those made by Nvidia.
Still, analysts are skeptical about China’s ability to cut its dependence on Nvidia chips.
“In terms of China’s domestic chip preparedness, I believe it is misleading to suggest the country can advance AI at a current level solely with domestic alternatives and without NVIDIA’s systematic offerings,” Ray Wang, research director for semiconductors, supply chain and emerging technology at Futurum Group, told CNBC.
Seeking leverage?
Experts, while agreeing that China has become more confident in its ability to counter Nvidia, suggest the country could be using access to its market as leverage in trade negotiations with the U.S.
“The move is likely to be a negotiation tactic as part of a broader set of discussions involving other topics including tariffs. China is no doubt trying to encourage and establish silicon self sovereignty, while also getting the best possible chip in the meantime,” AJ Kourabi, analyst at SeminAlysis, told CNBC.
The U.S. has indicated that it might allow even more advanced Nvidia chips than the H20 into the Chinese market.
Under the Joe Biden administration, export controls on advanced chips had been increasingly tightened with the aim of blocking China’s access to the best American technology. That trend after accelerating initially under the Trump administration is now reversing.
According to Reva Goujon, director at Rhodium Group, by rejecting the H20 and RTX Pro, Beijing could be looking to create an opportunity to negotiate access to more advanced GPUs.
She added that it’s likely not a coincidence that it comes amid other leverage-building by China this week, referring to its recent anti-dumping investigation into imports of certain analog chips from the U.S.
“As Beijing tests Trump’s transactionalism, it has to build up leverage of its own,” she said.
