Nvidia demands cut in clients’ China dealings to protect American AI lead
▸ Chipmaker curbs cloud providers ▸ Most partners must be non-Chinese ▸ Blow to Beijing’s tech goals
Nvidia has ordered its data centre partners to reduce their exposure to Chinese customers, further hampering China’s ability to keep up with the US in the AI superpower race.
The world’s largest chipmaker has told cloud computing clients they must sell at least 51 per cent of their services to non-Chinese companies, according to people with knowledge of the matter. No restrictions existed previously.
The instructions have been communicated verbally and conveyed by Nvidia’s sales teams rather than spelt out in documents, the people said.
The move means Chinese tech companies face a new threat to their AI ambitions as Washington moves to restrict the access to advanced US chips they had through overseas cloud computing deals. Many Chinese groups had relied on such leases for advanced AI tasks, including model training.
The compliance rules apply to Nvidia’s clients globally and not just data centres in Asia, two of the people said. They affect future contracts rather than existing leasing agreements.
“Longstanding US policy encourages every cloud to build on American infrastructure and to win business everywhere they can,” Nvidia said. “America’s longstanding policy has always supported the build-out of American infrastructure worldwide, bringing prosperity, influence, and jobs home.”
Nvidia imposed the requirement over the summer in an effort to reduce the criticism it receives regularly from US lawmakers and other critics of its approach to China, according to two people familiar with the matter.
The US is seeking to clamp down both on intermediaries that have helped create a thriving black market for Nvidia’s chips in China, and on Chinese companies’ access to advanced chips through overseas leasing deals.
Cloud providers have, however, struggled to comply with the curbs because it is “difficult to find enough non-Chinese clients outside the US”, said a Singaporebased group. “If strictly implemented, it will definitely hurt business.”
Nvidia’s crackdown has also fuelled a severe shortage of advanced computing power for Chinese tech companies. A rack of Nvidia’s B300 chips, which sells for about $600,000, last month fetched Rmb18.5mn ($2.8mn) in China because of their scarcity, according to a person with knowledge of the deal.
Nvidia had already more than halved the number of Asian customers authorised to buy its AI chips after it created a “white list” of groups that had passed tough compliance checks aimed at preventing the products from reaching China. That meant fewer Nvidia chips being smuggled into China, forcing more Chinese groups to pursue leasing deals with overseas cloud providers.
The US and China are by far the largest sources of demand for computing power, while Chinese tech groups have been the biggest clients for data centres in regions such as south-east Asia.
Nvidia’s move has also prompted data centres outside the US to search desperately for clients that are not Chinese. They could be forced to shrink the scale of their operations if they cannot do so.
Nvidia shares have fallen more than 13 per cent in the past month but remain 7 per cent higher this year. The recent dip in the stock means Jensen Huang’s group has been overtaken by Apple as the world’s most valuable company.
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