Nvidia is facing USD5.5 billion in charges after the U.S. government said it would require licenses for exports to China of its H20 artificial intelligence chip, which has been one of its most popular chips. Nvidia’s AI chips have been a key focus of U.S. export controls as American officials have moved to keep the most advanced chips from being sold to China. Almost immediately after those controls were implemented, Nvidia began designing chips that would come as close as possible to U.S. limits while still being legal to sell in China. The H20 is currently Nvidia’s most advanced chip for sale in China and is central to its efforts to stay engaged with China’s booming AI industry. Chinese companies including Tencent, Alibaba and TikTok parent ByteDance had been ramping up orders for H20 chips due to booming demand for low-cost AI models from start-up DeepSeek. While the H20 chip is not as fast at training AI models as Nvidia’s chips for sale outside China, it is competitive with some of those chips for inference, where AI models serve up answers to users. Inference is fast becoming the biggest part of the AI chip market. Nvidia CEO Jensen Huang last month argued that Nvidia is well positioned to dominate that shift. But Nvidia said that the U.S. government now plans to restrict H20 sales to China because of the danger that the chips could be used to build a supercomputer.
While the H20 has lower computing capabilities than other Nvidia chips, its ability to connect to memory chips and other chips at high speeds is still high. That attribute makes it useful in building supercomputers in China, and sending parts that could be used in those systems has been restricted by U.S. export controls since 2022.
The Institute for Progress, a non-partisan think tank in Washington, said in an essay arguing for restricting exports of the chips that Chinese firms were probably already building such systems. “At least one of the buyers, Tencent, has already installed H20s in a facility used to train a large model, very likely in breach of existing controls restricting the usage of chips in supercomputers exceeding certain thresholds. DeepSeek’s supercomputer used to train their V3 model is also likely in breach of the same restrictions,” the group wrote. Nvidia said that the U.S. government informed it on April 9 that the H20 chip would require a license to be exported to China and on April 14 told Nvidia those rules would be in place indefinitely. It is unclear how many, if any, of those licenses the U.S. government might grant. Nvidia’s China business is likely to “fall to nearly zero”, Morningstar Analyst Brian Colello said, declining from about 10% of total revenue last year, which was already significantly reduced from previous levels. Nvidia began selling H20 chips to the Chinese market in early 2024, after its advanced A100, H100, A800 and H800 AI chips were all placed under U.S. export controls due to national security concerns.
“With its powerful computing power and energy efficiency advantages, the H20 chip has become key hardware for LLM training,” said Gao Chengfei, Director of Guangzhou-based consulting firm Tiaoyuan. TikTok owner ByteDance and social media giant Tencent have both relied on the H20 in their AI efforts. Each company ordered about 230,000 of Nvidia’s Hopper-series chips last year, ranking them by order volume only behind Microsoft, which bought 485,000 chips, according to research firm Omdia. Demand for H20 chips has intensified this year, driven by growing demand for computing power to run the high-performance, low-cost models developed by Hangzhou-based start-up DeepSeek. ByteDance, Tencent and Alibaba Group Holding, all “significantly increased” their orders of H20 chips following the rise of DeepSeek, the South China Morning Post reports.
Last week, Chinese Vice Premier He Lifeng met with Nvidia CEO Jensen Huang in Beijing, saying China holds vast potential for investment and consumption, with industrial transformation and upgrading gaining pace. China remains a fertile ground for foreign investment and trade, He said, adding that China welcomes more U.S. companies, including Nvidia, to deepen their presence in the Chinese market, fully leverage their strengths and capabilities, and gain a competitive edge globally. Huang expressed optimism about China's economic outlook and said Nvidia is committed to further expanding its presence in the Chinese market. Huang also met with Ren Hongbin, Chairman of the China Council for the Promotion of International Trade (CCPIT). As a company that has been deeply cultivating the Chinese market for 30 years, Nvidia has grown together with the Chinese market and achieved mutual success. China is not only one of the world's largest consumer markets, its booming industrial ecology and leading software strength have also become important driving forces for the company to continue innovating, Huang said, as reported by the Global Times.
