China has ordered its tech companies, including giants like ByteDance, Alibaba, and Tencent, to halt chip sales to NVIDIA and other US-based firms. According to the report, the move comes as Beijing investigates potential security risks in NVIDIA’s H20 AI chips.
Chinese regulators, led by the Cyberspace Administration of China, are digging into claims that NVIDIA’s H20 chips might have backdoors for location tracking or remote shutdowns—allegations NVIDIA has firmly denied. The investigation kicked off in late July, with Beijing demanding proof that the chips are secure.
Why the Boycott?
China’s move is part of a bigger plan to boost its own chip industry and counter US restrictions. Since 2022, the US has blocked NVIDIA from selling its top AI chips to China, citing national security concerns.
NVIDIA responded with the H20, a less powerful chip designed to meet US export rules, but it’s still a hot commodity, with over 1 million orders in China by July 2024. Beijing’s latest order aims to push companies toward local chipmakers like Huawei and Cambricon, though their tech still lags behind NVIDIA’s.
Some Chinese firms are reportedly ignoring the guidance, quietly stocking up on H20 chips before tougher US sanctions hit.
At the same time, they’re buying domestic chips to keep Beijing happy. The probe also reflects China’s worries about relying on US tech, especially after the US tightened export controls on 140 Chinese chip firms in December 2024.
What’s Next for NVIDIA and China?
This boycott could hurt NVIDIA, which gets 12% of its revenue—about $3.7 billion—from China. The company’s shares dipped 2% after similar news in September 2024.
Meanwhile, China’s push for homegrown chips is backed by billions in subsidies, but local options aren’t yet on par with NVIDIA’s. The investigation’s outcome, expected soon, will decide if the boycott tightens or eases.
