Chinese tech giants, including ByteDance, Alibaba, and Tencent, have reportedly placed over $16 billion in orders for NVIDIA’s H20 AI server chips within the first three months of 2024. According to The Information, these purchases come as demand for AI computing power surges across China. Especially with the rise of startups like DeepSeek, which are developing cost-effective AI models.
The H20 chip is currently the most advanced AI processor that Nvidia can legally sell in China due to strict U.S. export regulations. Following Washington’s decision to tighten controls on high-performance semiconductor exports in October 2023, NVIDIA introduced the H20 to comply with these new restrictions. However, a potential supply shortage could create hurdles for Chinese companies looking to expand their AI capabilities. In March, leading Chinese server manufacturer H3C warned of possible constraints on H20 chip availability.
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China’s AI ecosystem relies heavily on NVIDIA’s technology, with companies like Inspur, Lenovo, and Huawei’s former x86 server business, xFusion, acting as major hardware partners. But with export limitations in place since 2022, Washington remains concerned about the potential military applications of advanced AI chips. The Biden administration has continued these measures, while former President Donald Trump has proposed additional tariffs of around 25% on semiconductor imports, which could further disrupt supply chains.
Despite these geopolitical tensions, Nvidia continues to benefit from the Chinese market, reporting $17.11 billion in revenue from the region (including Hong Kong) for fiscal year 2025. While CEO Jensen Huang has downplayed immediate business risks, he acknowledged that in the long run, NVIDIA may need to shift production back to the U.S. to adapt to changing trade policies.
China’s growing appetite for AI chips signals a race to develop more domestic alternatives. Companies like Huawei and Biren Technology are ramping up efforts to build their own AI processors to reduce reliance on foreign suppliers. If Nvidia faces further restrictions, Chinese firms may accelerate investments in homegrown semiconductor technologies, potentially reshaping the global AI hardware landscape.
