China has issued new rules requiring data centers receiving government funding to use only domestically produced artificial intelligence chips, two sources familiar with the matter told Reuters. The move marks one of the strongest efforts yet by the Chinese government to remove foreign technology from critical infrastructure and accelerate its goal of self-sufficiency in AI chips.
Chinese regulators have told data center projects with less than 30% completion rates to remove installed foreign chips or cancel purchase plans, people said. Projects at more advanced stages will be evaluated individually. The new rules could have a major impact on foreign chipmakers such as Nvidia, AMD and Intel, which have long supplied chips to China’s burgeoning AI data center sector.
It is still unclear whether this guidance applies nationwide or to specific regions. Regulators including the Cyberspace Administration of China and the National Development and Reform Commission did not respond to requests for comment.
Nvidia and its impact on US-China chip tensions
This new directive could be a major blow to Nvidia, whose AI chips, including the H20, B200, and H200 models, are widely used for AI data processing. Nvidia was looking to regain market share in China after U.S. export restrictions severely limited sales. However, due to these restrictions, Nvidia’s market share in China has already decreased from 95% to zero in 2022.
The move comes shortly after US President Donald Trump said he would allow China to buy some NVIDIA chips, but not the most advanced ones. Nevertheless, China’s latest measures have effectively barred foreign chip suppliers from government-funded projects, creating new opportunities for local companies such as Huawei, Cambricon, Meta-X, Moore Thread and Enframe.
Benefits and risks for domestic companies
Since 2021, China’s AI data center projects have received more than $100 billion in state funding, according to a Reuters investigation. Many of these projects will now need to rely solely on domestic chip makers. While this has the potential to boost sales for local manufacturers, it also poses challenges. Developers accustomed to Nvidia’s reliable hardware and software may find the transition difficult.
Some projects have already been halted as a result of the directive, including one in the northwestern states that would have introduced NVIDIA chips. Meanwhile, U.S. sanctions continue to restrict China’s access to advanced chip-making tools, limiting the country’s production capacity for high-end processors.
The Chinese government has taken similar measures in the past, including blocking purchases of Nvidia’s top chips and banning Micron products from critical infrastructure. The latest rules deepen the divide between the U.S. and Chinese technology ecosystems and strengthen Beijing’s long-term plan to achieve full technological independence.
(Information provided by Reuters)
