Nvidia has fallen short of delivering chip orders from China’s leading tech giants, ByteDance, Alibaba, and Tencent. In anticipation of further clampdown from Washington, the trio had placed rush orders for Nvidia’s H20 chips, AI processors specifically designed to comply with US export restrictions.
According to Asian news outlet Nikkei Asia, Nvidia attempted to secure around a million units by May, but failed after the Trump administration imposed new licensing requirements in early April. Sources familiar with the matter said the value of the orders placed by ByteDance, Alibaba, and Tencent exceeded $12 billion.
The companies reportedly acted well before the official curbs, starting procurement drives in late 2023. Yet, Nvidia could not fulfill the total demand before restrictions came into effect. Several billion dollars worth of chips were delivered prior to the deadline, but the supply did not meet the full order.
Chinese tech firms scramble for Nvidia chips
ByteDance, the company behind TikTok, was supposedly the biggest buyer among the three. All three companies are struggling to meet the demand for AI computing, partly because the AI user base grew on DeepSeek, a Chinese large language model that topped both the US and Chinese app store download charts in January.
Tencent’s integration of DeepSeek into its WeChat platform in February boosted infrastructure requirements and pushed demand upward across China’s tech sector.
“The H20 curb didn’t come as a surprise,” said a senior executive at a major Chinese technology company. “Everyone was stockpiling before the ban. It was still legal, and the chip’s performance made it a logical choice.”
The Nvidia H20 chip is the most downgraded version of the company’s powerful H100 GPU. The H100 debuted globally in the third quarter of 2022, and after US export bans, Nvidia introduced the H800 and eventually the H20 for Chinese clients.
AI engineer Eugene Lee, based in Hong Kong, noted that while the H20 appears optimized for training on paper, it actually excels more in inference.
“If existing inventories of the H100 and H800 are depleted, it could seriously hinder the training of advanced models and the development of next-generation systems, posing a substantial threat to China’s competitiveness in high-end AI development,” Lee warned.
Search for alternatives and global workarounds
Chinese companies are looking for a way around the US law that limits chip exports of certain models to sustain access to AI hardware. These include sourcing Nvidia chips through subsidiaries based outside China or forming alliances with telecom providers abroad.
ByteDance and Alibaba have expanded their overseas data center operations. The former has built facilities in Ireland and Norway, while Alibaba operates in 13 countries, including America.
Sources revealed that China’s data center operators are evaluating platforms built on Huawei’s Ascend chips. Earlier this month, Huawei announced its CloudMatrix 384, a high-performance AI computing solution connecting 384 Ascend chips that could rival Nvidia’s GB200 NVL72 output.
Nvidia prepares for revenue fall
On April 15, Nvidia announced that it expects to take a $5.5 billion revenue hit in the current quarter as a direct result of export restrictions.
China accounted for approximately 13.1% of Nvidia’s revenue in its most recent fiscal year ending January 26, down from nearly 17% the year before. During the same period, Singapore’s share of Nvidia’s revenues grew from 11.2% to 18%.
Meanwhile, Taiwan Semiconductor Manufacturing Co. (TSMC) is speeding efforts to improve the United States’ domestic semiconductor production. Chairman and CEO C.C. Wei stated the company plans to manufacture 30% of its most advanced 2-nanometer chips at its Arizona facilities.
Wei confirmed that the construction of TSMC’s second plant’s launch was moved forward by several quarters from its original 2028 timeline.
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