China Halts Nvidia Chip Orders, Escalating Tech Tensions

China’s internet watchdog has ordered major tech companies, including Alibaba Group Holding Ltd. and ByteDance Ltd., to cease all purchases of Nvidia Corp.‘s RTX Pro 6000D chip. According to the Financial Times, this directive comes as part of Beijing’s ongoing campaign to limit the influence of foreign semiconductor technology in the country’s burgeoning AI sector.

The Cyberspace Administration of China instructed these companies to halt testing of the RTX Pro 6000D and to cancel any existing orders. Prior to this announcement, there were indications that firms were prepared to place orders for tens of thousands of these chips. Nvidia developed this chip to navigate restrictions on advanced AI hardware exports to China, marking a significant escalation in the rivalry between the United States and China over technology access.

This latest move follows previous instructions issued during the summer that urged firms to avoid the H20 chip, a lower-end product that the Trump administration had allowed to be shipped to China earlier this year. In response to the news, Nvidia’s stock fell 1% in premarket trading, while rival Advanced Micro Devices Inc. saw a decrease of approximately 0.7%.

At a press briefing in London, Nvidia’s Chief Executive Officer, Jensen Huang, expressed disappointment over the situation, stating, “We can only be in service of a market if the country wants us to be.” Huang is currently accompanying Donald Trump during his state visit to the UK, where discussions include significant investments in technology infrastructure.

Nvidia has emerged as a focal point in the complex negotiations between Beijing and Washington this year, given its pivotal role in developing AI technologies. The company holds a dominant position in the market for chips essential to powering AI services for various firms, including Meta Platforms Inc. and DeepSeek.

In a further tightening of regulations, China recently ruled that Nvidia’s $7 billion acquisition of Mellanox Technologies Ltd. violated anti-monopoly laws, intensifying scrutiny on US technology firms operating in the country. Additionally, Beijing announced an investigation into dumping practices related to semiconductors produced by US firms like Texas Instruments Inc..

According to Vey-Sern Ling, managing director at Union Bancaire Privee, “China clearly prefers to develop AI at its own pace on a domestic tech stack. Better to bite the bullet now than to rely on US tech that can be restricted upon a whim.” Ling suggested that a complete ban on Nvidia’s chips, if confirmed, would indicate growing confidence in China’s local semiconductor capabilities, although it could also serve as a bargaining chip in ongoing trade negotiations.

Looking ahead, Trump is scheduled to speak with Chinese leader Xi Jinping on March 15, 2024, following trade discussions held in Madrid. The RTX6000 series chip, while not among Nvidia’s flagship products, was designed specifically for the restricted Chinese market. Chinese companies have long sought access to Nvidia’s more powerful accelerators, which the US has prohibited due to concerns over their potential applications in enhancing China’s geopolitical and military ambitions.

The decision by Chinese regulators reflects a growing sentiment that domestic chip manufacturers are becoming increasingly sophisticated. Major firms like Alibaba and Baidu Inc. are actively working to reduce their reliance on foreign technology by developing their own semiconductor solutions. Notably, Alibaba has secured a significant customer in China’s second-largest wireless carrier for its “T-Head” AI chips, suggesting that the company’s efforts in semiconductor development are gaining traction within the domestic market.