After news broke of the Trump administration levying a 15% commission on NVIDIA and AMD's chip sales to China, sources quoted by Bloomberg claim that the Chinese government is growing anxious about using American AI chips, particularly for security and government work. NVIDIA and AMD have started to receive their AI GPU chip export licenses, and due to its dominance in the AI chip industry, NVIDIA has come under scrutiny by China for potential backdoors and tracking software in its products. While the firm has denied these claims, the fear of relying on foreign AI chips appears to be stimulating the Chinese government's opposition to foreign-sourced AI hardware.
Chinese Government Urges Firms To Not Rely On NVIDIA's H20 AI GPUs, Says Report
Today's report follows earlier news last month, which outlined that Chinese cybersecurity officials were investigating NVIDIA's H20 AI chips for potential backdoors and location tracking mechanisms. While NVIDIA only recently started receiving licenses to sell the H20 GPUs in China, the earlier restrictions levied on the sales by the Trump administration generated hefty speculation about the chips making their way to the country via other nations such as Singapore and Malaysia.
Consequently, speculation grew about the Trump administration asking NVIDIA to include location tracking in its chips to ascertain their final destination reliably. However, NVIDIA has vehemently denied that any backdoors or tracking mechanisms are present in its chips as it aims to resume its Chinese sales after receiving US export licenses earlier this month.
However, despite NVIDIA's assurances, it appears that Chinese authorities continue to remain skeptical about the firm's chips. According to Bloomberg, the authorities have sent letters to several Chinese firms to urge them not to rely on NVIDIA's H20 AI GPUs, especially when it came to government or national security applications. The publication's sources add that while AMD's AI accelerators are also part of the government's concerns, it is unclear whether they involve a broader set of AMD's chips or the MI308 accelerators.
Not only is the Chinese government concerned about the security implications of using foreign-source AI chips, but it is also fearful of stymying the domestic AI chip industry. The Chinese government wants local firms to rely on domestic AI chips, and as a result, it is encouraging them to shun NVIDIA's products. China's leading-edge AI chips are developed by Huawei, but due to US sanctions on chip manufacturing, they lag behind NVIDIA's products in terms of performance. Additionally, NVIDIA's CUDA software for using its chips is also ahead of Huawei's offerings.
While the Trump administration initially banned H20 sales to China, it reversed course later on after heeding to NVIDIA CEO Jensen Huang's argument of ensuring US dominance across the global AI industry. Officials argue that it serves US interests to have China use American chips to stifle any revenue that could be diverted to Huawei and aid it in developing advanced chips.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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