Chinese authorities have reportedly sought information from companies regarding why they prefer Nvidia’s H20 over local alternatives and whether they have found any security issues in the Nvidia hardware.
Nvidia Corp.’s (NVDA) China woes continue to abound, with a new report stating that President Xi Jinping’s administration has asked local companies to avoid using the artificial intelligence (AI) stalwart’s China-compliant H20 chip.
It was only last month that CEO Jensen Huang brought good news regarding the potential lifting of a ban on the export of H20 AI chips to China by the White House. When the Street began to hail Huang as a dealmaker for appeasing President Donald Trump, it came to light on Monday that the victory had come at a cost.
The Financial Times reported that the Trump administration has bargained for a 15% share of Nvidia and AMD’s (AMD) China revenue as a quid pro quo for obtaining the license to resume H20 sales in the Asian nation.
Nvidia stock resisted a sell-off on Monday but ended the day down 0.37%. Trump told reporters on Monday that he would permit the sale of Nvidia’s stripped-down high-performance computing Blackwell chips in China.
A Bloomberg report, citing people familiar with the matter, said early Tuesday that Chinese authorities have sent notices to a range of firms, forbidding the use of the H20 chips, particularly for any government or national security-related work by state enterprises or private companies.
The move pours cold water on Trump’s hopes of making a windfall for the government.
Bernstein’s estimates put Nvidia’s H20 sales at $23 billion if the Trump administration had not banned its export in April.
The report stated that it was unclear whether AMD’s similar China offering, the MI308, was also mentioned in the letters.
In the letters, Chinese authorities have reportedly sought information from companies regarding why they prefer Nvidia’s H20 over local alternatives and whether they have found any security issues in the Nvidia hardware.
China’s stricter regulations now apply to sensitive applications and it could be possible that this guidance could be extended to a broader range of settings, the report added.
Last week, Nvidia’s Chief Security Officer, David Reber, stated in a blog post that the company’s graphic processor units (GPUs) do not have a “kill switch” functionality that allows for the remote deactivation of the chips. Reber’s clarification came after the Cyberspace Administration of China said last week that it needed Nvidia to provide documents about what it called security vulnerabilities in the H20.
On Stocktwits, retail sentiment toward Nvidia stock stayed ‘bullish’ (55/100), although the degree of optimism tempered from a day ago. The message volume, however, picked up pace and yet remained at ‘ normal’ levels.
Nvidia stock has gained over 35% this year. In overnight trading, the stock was down modestly.
The development has come despite China and the U.S. agreeing to a 90-day extension to the tariff pause.
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