In a surprising turn of events, the Chinese government has reportedly instructed major domestic tech giants like ByteDance, Alibaba, and Tencent to halt their purchases of NVIDIA’s latest H20 AI chips. This directive emerges amid Beijing’s growing fears over alleged security backdoors embedded within these chips, which could potentially serve as control mechanisms favoring Washington.
Despite NVIDIA’s firm denials, these concerns appear to have pushed China to take a firmer stance than initially expected.
For context, NVIDIA’s CEO Jensen Huang has faced numerous challenges navigating U.S. export controls, especially under the Trump administration, which has enforced strict measures on semiconductor sales to China. Now, even as NVIDIA struggled to get approval to sell its cutting-edge chips to the Chinese market, Beijing is effectively throwing up new barriers, freezing purchases of the H20 model by their top AI firms.
The core of the Chinese government’s apprehension lies in claims that these chips may harbor a location-tracking system and a ‘kill switch’ – a failsafe that could disable the chip if the user falls out of favor with the U.S. authorities. NVIDIA refutes such allegations, insisting no such backdoors exist. Yet, Beijing remains unconvinced, especially given the explicit language in the U.S. “AI Action” plan, which openly states that exported chips will include some form of backdoor regardless of NVIDIA’s stance.
Previously, the Chinese regulators seemed to offer mere ‘guidance’ discouraging purchases, but the recent developments suggest a mandatory suspension, casting a shadow over NVIDIA’s ambitions in the world’s second-largest economy. Before the export controls tightened, China was a strong supporter of the H20 chips, relying heavily on their computing prowess to fuel AI development. Now, the shift indicates a growing mistrust and a move towards self-reliance in AI hardware.
Meanwhile, industry observers note that NVIDIA’s Hopper architecture, including the H20 chip, is already facing pressure from newer designs like Rubin, signaling an inflection point in AI chip tech. On the Chinese side, the narrative has evolved beyond mere imitation – the country has made significant strides across technology and defense sectors, further motivating them to accelerate homegrown alternatives.