Chinese AI Customers Eye Domestic “In-House” Chips Instead of NVIDIA’s Export-Compliant GPUs

NVIDIA reportedly faces a new roadblock in its AI journey, as Chinese clients refuse to acquire the new "cut-down" AI chips designed after stricter US regulations.

When it comes to Chinese markets, NVIDIA has penetrated deeply into them across a diverse range of markets through its AI offerings, especially the Hopper H100 which has been a huge success. China and its consumer base have heavily contributed to NVIDIA's data center revenue in FY23, however, the recent product portfolio which is designed to comply with US policies isn't looking like it might be that well received in the country.

According to a report by The Wall Street Journal, Chinese companies who are in the race for generative AI dominance such as Alibaba and Tencent, have reportedly refused to buy any of NVIDIA's new AI GPUs, which include the cut-down H20 and L20, designed in compliance with the US policies. The companies have reportedly stated to NVIDIA that order volumes for this year will drop "significantly", since not only do the new offerings come with heavily cut-down and degraded performance versus the original chips, but Chinese manufacturers such as Huawei are catching up with their own AI offerings, which will ultimately grasp NVIDIA's share in the markets.

NVIDIA's H20 AI GPU designed for the Chinese markets is reportedly seen as an "unfeasible" choice amongst Chinese tech giants, since not only is the performance drop from previous offerings quite high, but it is disclosed that Alibaba and Tencent see Chinese alternatives as much better choice, at least for workloads the require low-to-mind inferencing power, one that can be catered by AI chips from Huawei. It is said that Huawei has reportedly received orders of up to 5,000 of its Ascend 910B AI chip, and while the number isn't huge, it is enough to create an alarming situation for Team Green.

The situation isn't looking good for NVIDIA right now, and this could be leveraged by firms such as AMD and Intel, who are themselves preparing AI chips specific to Chinese markets. However, since these two companies are also US-based, their high-performance AI solutions may face similar restrictions in China. Moreover, in-house solutions from Huawei have also started to reach a state of maturity as well, making them a viable alternative to NVIDIA. Since the US policies are always uncertain, Chinese giants have started to prepare in advance, prioritizing local manufacturers instead of NVIDIA.

News Source: The Wall Street Journal