The primary beneficiary of the AI boom is grappling with how to sell its chips to China without breaching Washington’s chip regulations. According to reports from anonymous sources, Nvidia is developing a version of its latest flagship AI chip specifically for the Chinese market. The U.S. chip designer is collaborating with Inspur, one of its major Chinese distributors, to facilitate the launch and sale of this China-tailored version of its Blackwell series chip.
Since October 2022, the U.S. has restricted the sale of Nvidia's AI chips to China. In response, Nvidia has attempted to develop new chips that comply with U.S. regulations, only to face tighter restrictions from Washington and hesitancy from Chinese customers towards less powerful products. Before these export controls, China accounted for a quarter of Nvidia’s data center revenue, which is closely tied to its chip business. In May, the company acknowledged that its data center revenue in China had dropped significantly following the expansion of chip controls in October 2023.
Still, Nvidia is poised to sell over a million of its H20 chips, currently the most advanced chip available to the Chinese market, this year, according to research firm SemiAnalysis. The firm expects H20 sales to generate $12 billion in sales for the U.S. chip designer this year. (The company had $60.9 billion in revenue for its most recent fiscal year, which ended January 2024.) Nvidia unveiled its Blackwell chip series in March, with mass production set for later this year. The company claims the new platform will allow users to run real-time generative AI applications at significantly lower cost than its predecessors.
The U.S. continues to intensify its semiconductor-related export control measures. Washington is reportedly urging the Netherlands and Japan to further limit China's access to chipmaking equipment and is even considering invoking a rule that would give it authority over any product utilizing U.S. technology. Nvidia shares rose approximately 1.5% in pre-market trading on Monday. However, the company's shares fell nearly 10% last week due to reports of potential expanded controls and former President Donald Trump's remarks suggesting that Taiwan, a major chipmaking hub, should fund its own defense.