Key Points
- China now requires new state-funded data centers to use exclusively domestically made AI chips.
- Projects that are less than 30% complete must remove or cancel orders for foreign chips, such as those from Nvidia, AMD, and Intel.
- The move is a major step towards China’s goal of technological self-sufficiency in the critical AI sector.
- This will likely boost Chinese chipmakers like Huawei but dash the hopes of foreign firms like Nvidia to regain market share.
The Chinese government has issued new guidance requiring that data center projects receiving state funding use only domestically made artificial intelligence chips, according to two sources familiar with the matter.
In recent weeks, Chinese regulators have ordered such data centers that are less than 30% complete to remove all installed foreign chips or cancel any plans to buy them. Projects that are further along will be reviewed on a case-by-case basis, the sources said.
This could be one of China’s most significant moves yet to eliminate foreign technology from its critical infrastructure, coming even as trade tensions between Washington and Beijing have temporarily cooled. The move is a major step in China’s quest for AI chip self-sufficiency. Access to advanced AI chips, especially those from Nvidia, has been a major point of contention between the U.S. and China as the two countries compete for dominance in high-end computing and AI.
U.S. President Donald Trump said in an interview last week that Washington would “let them deal with Nvidia but not in terms of the most advanced” chips. However, Beijing’s latest move could crush Nvidia’s hopes of regaining market share in China, while giving local rivals like Huawei another big opportunity to boost their sales. It’s not yet clear whether this guidance applies to the entire country or only to certain provinces.
Besides Nvidia, other foreign chipmakers like AMD and Intel also sell data center chips to China and will be affected as well.
AI data center projects in China have attracted over $100 billion in state funding since 2021. Since most data centers in China receive state funding, the impact of this new guidance could be widespread. Some projects have already been suspended, including a facility in a northwestern province that had planned to use Nvidia chips.
While this directive will help boost sales of Chinese-developed chips, it also comes with risks. The move could widen the gap in AI computing power between the U.S. and China. U.S. tech giants like Microsoft and OpenAI are spending hundreds of billions of dollars on data centers powered by Nvidia’s most advanced chips. At the same time, Chinese chipmakers still face supply constraints due to U.S. sanctions on manufacturing equipment.
