Bloomberg sources revealed that Chinese companies are encouraged not to buy Nvidia H20 chips – the type used to develop and operate AI models.

The move is aimed at helping domestic AI chipmakers gain a larger market share, while also preparing for any potential additional restrictions from the US.

Earlier this year, Beijing also required local electric vehicle makers to buy more from domestic chip suppliers.

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Chinese companies are encouraged to buy domestic AI chips instead of Nvidia's. Illustration photo: ChatGPT

In 2022, the US government banned Nvidia from selling its most advanced AI processors to Chinese customers in a bid to curb Beijing's technological advances.

Nvidia has modified subsequent versions of its chips to comply with US Department of Commerce regulations, and the H20 series fits that criteria.

In recent months, several regulators — including China’s Ministry of Industry and Information Technology — have issued guidelines to encourage businesses to rely more on homegrown companies like Huawei and Cambricon, according to the sources.

At the same time, Chinese officials want local companies to build the best AI systems possible, which means that if they need to buy some foreign semiconductors instead of domestic alternatives, Beijing will still accept it.

In another development, Nvidia CEO Jensen Huang said on September 27 that he is doing his best to serve customers in China and comply with US government regulations.

Nvidia sees sales surge as data center operators around the world scramble for its processors.

In the third quarter, Chinese customers contributed 12% of revenue, or about $3.7 billion, to Nvidia, up more than 30% from a year earlier.

Nvidia chips are the gold standard for companies looking to develop artificial intelligence services. From Meta, OpenAI, Alphabet to ByteDance, Tencent… all are racing to buy and stockpile Nvidia chips.

Meanwhile, Chinese chip designers and manufacturers are scrambling to introduce alternatives to Nvidia. Beijing has subsidized semiconductors with billions of dollars, but local AI chips still lag far behind American companies.

According to SCMP , Huawei has provided samples of the Ascend 910C chip to major server companies in the mainland for hardware and configuration testing.

The company is also pitching the chips to major domestic internet companies – which are Nvidia customers.

However, China's AI sector is still growing despite US restrictions.

Bloomberg sources revealed that some companies “turned a blind eye” to the request to stay away from Nvidia H20 chips and still bought more chips before the US is expected to issue a new ban later this year.

(According to Bloomberg, SCMP)