Beijing has rolled out new energy efficiency rules that could block Chinese buyers from acquiring Nvidia’s popular H20 chips. The move puts about $17bn of Nvidia’s annual China business at risk if officials step up enforcement.
Officials at the National Development and Reform Commission (NDRC), China’s top economic planning body, have advised companies to adopt chips that meet high environmental standards for all newly built data centers.
Documents reviewed by the Financial Times reveal that Nvidia’s H20 chip, which is specifically designed for the Chinese market under Washington’s export controls, does not satisfy the NDRC’s recent requirements. If Beijing enforces these policies more strictly, domestic technology giants, including Alibaba, ByteDance, and Tencent, would no longer be able to install H20 in new facilities.
Despite the discouragement, demand for the H20 in China remains strong, thanks in part to the rules not yet being firmly implemented. Two people familiar with the situation say that for months, major companies have continued buying the chip. Some firms are even working around the new energy standards by placing the H20 in existing data centers rather than in newly expanded ones to avoid potential penalties.
The NDRC’s clampdown is nonetheless worrisome for Nvidia, which has been seeking to schedule a meeting with Commission Chair Zheng Shanjie to address the issue.
China’s renewed focus on reducing energy consumption in data centers arrives at a sensitive time in the US-China technology rivalry. The world’s two largest economies are racing to develop advanced artificial intelligence, and both governments have imposed curbs that limit access to cutting-edge hardware.
Washington has already banned the sale of Nvidia’s most advanced chips to China, arguing that they could boost military capabilities. This restriction led to the creation of the H20, a slightly scaled-down processor approved for Chinese buyers after the US tightened export rules in October 2023.
Pressure has grown in China for big corporations to reduce reliance on foreign chipmakers like Nvidia. Domestic companies such as Huawei offer processors that align more closely with Beijing’s green targets, and that factor alone could drive Chinese buyers away from the H20.
China’s NDRC wants data centers to adopt locally produced greener chips
According to people close to the matter, the NDRC wants to see local data centers adopt chips with lower energy consumption and greater efficiency. Non-compliance may prompt on-site inspections and fines, so major internet companies prefer to keep a safe distance from any regulatory fallout.
Nvidia has explored solutions to tweak its H20 chip to meet the strict environmental requirements, according to one insider. But such modifications would inevitably lower the chip’s performance, which could turn off prospective buyers. Meanwhile, tech giants such as Alibaba and Tencent, eager to harness AI for new products, previously stepped up orders for the H20 when DeepSeek’s AI boom swept through China. Buyers also rushed to stockpile chips in anticipation of any further sales bans from the US since rumors have circulated that Washington might broaden its restrictions to cover the H20.
In addition to these energy efficiency rules, Nvidia has found itself under growing scrutiny by Chinese regulators. The State Administration for Market Regulation (SAMR) began an antitrust investigation in December. One person with direct information about the probe says authorities are looking into whether Nvidia had started withholding chips from Chinese customers even before the US export ban took effect in late 2022.
China remains a major market for Nvidia, accounting for $17.1bn in revenue—13 percent of its total—for fiscal year 2025, based on the company’s annual report. Losing ground in this region would have a clear financial impact. As the company tries to maintain good relations with Beijing, it also must adhere to the measures imposed by US policymakers.
Nvidia issued a statement saying, “Our products provide superb energy efficiency and value in every market we serve. As technology moves rapidly, export control policy should be adjusted to allow US firms to offer the most energy efficient products possible, while still achieving the Administration’s national security goals.”
The NDRC’s rules target not just Nvidia but other foreign chipmakers. Intel’s HL328 and HL388 chips also fail the commission’s guidelines, though the impact is expected to be less significant because Intel’s AI chip sales in China are relatively limited.
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