China's primary internet regulator has instructed the country's leading technology companies to cease purchasing specific artificial intelligence chips from the U.S. firm Nvidia. The directive is part of a broader government initiative to strengthen China's domestic semiconductor industry and reduce its dependence on foreign technology.
The Cyberspace Administration of China (CAC) recently told major firms, including Alibaba and ByteDance, to stop ordering and testing Nvidia's RTX Pro 6000D, a chip designed specifically for the Chinese market. This move signals a significant acceleration in Beijing's strategy for technological self-reliance.
Key Takeaways
- China's internet regulator has banned major tech companies from buying Nvidia's RTX Pro 6000D AI chip.
- The move affects large firms like Alibaba and ByteDance, who were testing the product for large-scale orders.
- This action is part of Beijing's strategy to promote its domestic semiconductor industry and achieve technological independence from the U.S.
- Chinese officials reportedly concluded that homegrown AI chips are now comparable in performance to the Nvidia models available in China.
- Nvidia's stock price declined by 2.7% following the news of the directive.
Government Mandate Halts Nvidia Orders
According to sources familiar with the decision, the Cyberspace Administration of China issued the order to several of the nation's largest internet companies this week. The instruction specifically targets the Nvidia RTX Pro 6000D, a graphics processing unit (GPU) tailored to comply with U.S. export controls.
Companies like Alibaba and ByteDance had already begun testing and verification processes with server suppliers, with plans to order tens of thousands of these chips. Following the CAC's directive, these companies have reportedly instructed their suppliers to halt all related work immediately.
This new ban is more extensive than previous government guidance, which had primarily focused on another Nvidia chip designed for China, the H20. The government's decision appears to stem from a recent evaluation of its domestic capabilities.
Background on U.S. Export Controls
The situation developed after the U.S. government, under the Biden administration, implemented stringent export controls to limit China's access to advanced AI technology. These rules prevented Nvidia from selling its most powerful AI chips to Chinese customers. In response, Nvidia developed alternative products, such as the H20 and the RTX Pro 6000D, that met the performance restrictions set by the U.S.
Push for Domestic Chip Alternatives
Beijing's latest move is a clear indication of its commitment to fostering a self-sufficient semiconductor ecosystem. The government is actively pressuring its technology giants to prioritize and integrate domestically produced hardware.
An executive at one of the affected tech companies stated that the government's message is now unambiguous. "Earlier, people had hopes of renewed Nvidia supply if the geopolitical situation improves. Now it’s all hands on deck to build the domestic system," the executive said.
This sentiment reflects a strategic shift from relying on foreign suppliers to investing heavily in local innovation and production. The goal is to create a robust internal supply chain that can compete with the U.S. in the global AI race.
Tripling Domestic Production
Recent reports indicate that China's domestic chipmakers are aiming to triple their total output of AI processors in the coming year, a clear sign of the scale of the country's ambitions in the semiconductor sector.
Evaluating Domestic Capabilities
The Chinese government's confidence in this new policy is based on internal assessments of its homegrown technology. According to one source, regulators recently convened meetings with domestic chip manufacturers like Huawei and Cambricon. Tech giants that also produce their own semiconductors, such as Alibaba and Baidu, were also included.
During these meetings, companies were asked to report on how their products' performance compared to Nvidia's chips that are permissible for sale in China. The regulators concluded that China's AI processors had achieved a level of performance that was either comparable to or exceeded that of the available Nvidia models.
"The top-level consensus now is there’s going to be enough domestic supply to meet demand without having to buy Nvidia chips," an industry insider noted.
Market Reaction and Nvidia's Position
The news had an immediate effect on the market, with Nvidia's shares falling 2.7% in morning trading on the day the news broke. The RTX Pro 6000D was one of the last significant Nvidia products that could be sold in high volumes in China, making the ban a notable development for the company's business in the region.
Nvidia's CEO, Jensen Huang, commented on the broader geopolitical situation during an appearance in London.
"We can only be in service of a market if the country wants us to be. I’m disappointed with what I see. But they have larger agendas to work out, between China and the US, and I’m understanding of that. We are patient about it."
His statement acknowledges the complex political dynamics that are increasingly shaping the global technology landscape. The directive from the CAC underscores the challenges faced by international tech companies navigating the intensifying rivalry between the United States and China.
