Chinese companies are reportedly increasing their orders for Nvidia’s H20 AI chips due to increased demand for low-cost AI models by DeepSeek.
The recent surge in orders came right after Nvidia’s Jensen Huang stated that DeepSeek will not have a negative impact on AI chips. He said that in reality, “it’s [the] complete opposite.”
Reuters recently reported that ByteDance, Alibaba, and Tencent have ramped up orders of Nvidia’s H20 chips. These chips are specific to China due to export controls by the U.S, as Chinese AI technology is rapidly gaining attention.
Besides requiring advanced AI chips for internal use, these tech companies also provide cloud computing services, which allows other smaller companies to access their AI tools.
Reuters stated that small companies in other sectors, such as education and healthcare, are also buying AI servers integrated with Nvidia H20 chips and DeepSeek’s models. Previously, however, only telecom and wealthier financial firms used to buy AI servers.
However, Reuters did not receive information about the size of these orders from its sources.
Nvidia says its products win in a competitive field
On Wednesday, Nvidia is all set to report its quarterly earnings. The company has not commented on the surge in the demand for H20 chips in China. However, it did say that its products tend to win “on merit in a competitive field.”
DeepSeek’s models are developed with a focus on ‘inference.‘ This means that its models not only rely on raw computational power but also optimize efficiency.
Earlier, when DeepSeep first launched, the market got the wrong impression that the demand for computing power would reduce. Soon after the model’s initial release, Nvidia lost over 16.9% in its stock value, and within a few days, its stock price fell to $118.62.
Since then, Nvidia has almost recovered its market value. According to estimations by analysis, Nvidia shipped roughly 1 million units of H20 chips in 2024, generating $12 billion+ for the company.
H20 is the primary chip Nvidia can sell legally in China
Due to ongoing trade wars and export restrictions, Nvidia can primarily sell H20 only to China. This chip was launched after the latest export restrictions went live in October 2023.
In fact, Nvidia’s most advanced chips have been banned from exporting to China since 2022 because the government is concerned about China’s usage of AI chips. They could use advanced technology to ramp up their military capabilities, which could become a national threat to the US.
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