NVIDIA Faces Challenges as Chinese Government Urges Local Companies to Avoid H20 AI GPUs Approved by US

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Chinese Government’s Concerns Over American AI Chips

Following recent announcements of a 15% commission imposed by the Trump administration on chip sales from NVIDIA and AMD to China, anxiety has surfaced within the Chinese government regarding the use of American AI chips. Bloomberg sources have indicated that these concerns particularly pertain to applications in security and government sectors. As NVIDIA and AMD begin to acquire export licenses for their AI GPU chips, skepticism regarding the integrity of these products has intensified, particularly from China, which worries about potential embedded backdoors and tracking software.

Investigation into NVIDIA’s H20 AI Chips

A report from earlier this month highlighted that Chinese cybersecurity officials are conducting investigations into NVIDIA’s H20 AI chips, scrutinizing them for possible vulnerabilities, including the possibility of location tracking. Even though NVIDIA has only recently been authorized to sell its H20 GPUs in China, speculation has been rife regarding illicit routes for these chips entering the Chinese market through countries like Singapore and Malaysia, in light of earlier sales restrictions by the Trump administration.

Amid these tensions, rumors surfaced suggesting that the Trump administration had urged NVIDIA to implant location tracking features in their chips to monitor their ultimate destinations. Nonetheless, NVIDIA has firmly rejected these allegations, maintaining that its products are free from any tracking mechanisms, as it seeks to reestablish sales in China following the receipt of U. S.export licenses.

NVIDIA CEO Jensen Huang — NVIDIA’s CEO Jensen Huang

Chinese Authorities Advise Against Foreign AI Chips

Despite assurances from NVIDIA, Chinese officials remain apprehensive about the company’s chips. Reports indicate that the Chinese government has formally instructed several local organizations to refrain from utilizing NVIDIA’s H20 AI GPUs, particularly for projects tied to national security. There is also concern regarding AMD’s AI accelerators, though it remains unclear if they fall under a wider category of AMD products or are specifically related to the MI308 accelerators.

Domestic Chip Development vs. Foreign Dependencies

The apprehension surrounding foreign AI chips stems not just from security implications, but also from a desire to bolster China’s domestic AI chip industry. Chinese officials are keen to promote local chipset production and are thus advocating for local firms to avoid products from NVIDIA. While leading-edge AI chips produced by Chinese firm Huawei are available, their performance currently trails behind that of NVIDIA’s offerings, in part due to restrictions imposed by U. S.sanctions affecting chip manufacturing. Furthermore, NVIDIA’s CUDA software ecosystem is significantly more advanced compared to Huawei’s alternatives.

U. S.Policy Shifts on AI Chip Sales

Initially, the Trump administration had prohibited the export of NVIDIA’s H20 chips to China. However, this position shifted after NVIDIA CEO Jensen Huang presented arguments highlighting the importance of maintaining U. S.competitiveness in the global AI landscape. U.S.officials view the use of American-made chips by China as a strategy to limit revenue that could potentially support Huawei in advancing its own chip technology.

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