Nvidia is encountering significant hurdles in its efforts to sell H200 AI chips to China, despite the US Commerce Department approving around 10 Chinese companies, including Alibaba, Tencent, ByteDance, and JD.com, to purchase the chips. Even with approval for each customer to buy up to 75,000 chips, no deliveries have been made. Sources indicate a complex situation where Chinese authorities are either blocking or tightly vetting orders, driven by a desire to focus on domestic AI chip development. This situation has led to suppliers of H200 parts halting production, with Nvidia having originally anticipated over 1 million orders from Chinese clients.
The stalled sales are projected to have a substantial financial impact on Nvidia, with the company facing a potential $5.5 billion hit. China, which once accounted for 13% of Nvidia's revenue and whose AI market was estimated by CEO Jensen Huang to be worth $50 billion this year, has seen Nvidia's share of AI accelerators effectively fall to zero due to US export controls. The continued delay is welcomed by some in Washington who believe sales to China would weaken the US's lead in AI.
Beijing's hesitation to clear chip purchases is partly attributed to a strategic calculation to foster its own homegrown AI chip industry, as well as unease over a US-negotiated arrangement that would see the US receive 25% of the revenue from chip sales, requiring the chips to pass through US territory. Chinese customs authorities have explicitly told agents that Nvidia's H200 chips are not permitted to enter the country, and government officials have warned domestic tech firms against buying the chips unless necessary, without providing clear reasons for these directives.
