Authorities force businesses to utilize local suppliers, including ByteDance, the parent firm of TikTok.
Chinese regulators are currently reviewing the activities of domestic companies, including leading technology firms Tencent and ByteDance, following their reported purchases of Nvidia’s H20 processors.
Chinese Regulators Question Nvidia Purchases
Three persons familiar with the situation told the Reuters news agency that authorities urged the corporations to provide an explanation on Tuesday and voiced worries about information dangers.
In recent weeks, Baidu and smaller Chinese IT companies have met with the Cyberspace Administration of China (CAC) and other agencies, according to one of the two sources and a third source.
China Questions Nvidia Chip Purchases
• Performance: H20 optimized for export limits; Ascend aims for similar AI speed.
• Availability: H20 subject to U.S. oversight; Ascend available without foreign restrictions.
• Security Concerns: H20 faces data-sharing worries; Ascend promoted as “secure & local.”
• Market Impact: Rising Ascend demand could challenge H20 sales in China.
According to the sources, the Chinese regulators questioned businesses about why they had to acquire chips from the US firm Nvidia when they could buy from local vendors.
According to one source, Chinese authorities are worried that the files Nvidia has requested businesses provide to the US government for assessment may include private information, including customer information.
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The individuals, who wished to remain anonymous due to the private nature of the talks, said that the businesses had not received a directive to cease purchasing H20 chips.
Nvidia Clarifies H20 Chip Purpose
On Tuesday, Nvidia stated that the H20 chip is intended for commercial use and is not designed for government infrastructure or military applications.
China has access to a strong supply of domestically produced chips to meet its technological needs.
The statement highlight that the U.S. government has never depended on chips manufactured in the United States for its internal operations.
• Aug 2025: China questions need for U.S. chips; urges domestic sourcing.
• Bloomberg: Notices discourage H20 in government projects.
• Market: SMIC stock jumps ~5% on local chip demand hopes.
Likewise, the United States would not depend on Chinese-made chips for official government usage.
Both countries maintain independence in sourcing chips for sensitive or official purposes.
Not recommended
Bloomberg News said on Tuesday that Chinese officials had warned local businesses not to use Nvidia’s H20 processors, especially for government applications.
According to the article, which cited individuals familiar with the situation, a number of businesses received formal notifications that discouraged them from using the H20, a lower-end chip, primarily for any government or national security-related activity by state firms or private corporations.
A further report from The Information claims that because of data security concerns, the CAC has ordered ByteDance, Alibaba, and Tencent to stop buying Nvidia processors altogether within the previous two weeks.
Key Facts: China–Nvidia H20 Chip Dispute
| Date / Period | Event / Development | Impact |
|---|---|---|
| Late 2023 | U.S. restricts export of advanced Nvidia AI chips to China | Nvidia designs H20 as a compliant alternative for Chinese market |
| July 2025 | U.S. reverses ban on H20 after Nvidia–Trump administration agreement | Allows limited sales, but with revenue-sharing agreement with U.S. government |
| Early Aug 2025 | Chinese regulators meet with Tencent, ByteDance, Baidu, Alibaba | Question need for U.S. chips; push for domestic suppliers |
| Aug 2025 (Bloomberg) | Formal notices issued discouraging H20 use in government-related work | Signals stronger shift toward Chinese chip makers like Huawei and SMIC |
| Aug 2025 (Reuters) | Nvidia says H20 “not a military product” | Attempts to maintain trust and market presence in China |
| Market Reaction | SMIC stock rises ~5% | Investors expect higher demand for local AI chips |
Shortly after US President Donald Trump’s administration lifted the export restrictions on H20 chips, the regulator met with over a dozen Chinese tech companies to discuss the CAC order, the Information article said.
SMIC Sees Chip Demand
Anticipating more demand for chips produced in the area, leading contract chipmaker SMIC saw a 5% boost on Tuesday.
Even without a total ban, Chinese authorities’ concerns might Reduce safety Nvidia’s recently restored access to the Chinese market as Chinese companies attempt to Follow the law
Following the implementation of export limitations on its more sophisticated AI processors in late 2023, Nvidia created the H20 especially for China. With the H20, processor Nvidia has now been able to selling the most cutting-edge AI chip in China.
After a deal between Nvidia and the Trump administration, US officials changed their judgment in July, effectively banning its sale to China earlier this year.
Risk to the source of income
China’s cybersecurity watchdog called Nvidia executives last month to inquire about whether the H20 presented backdoor security threats that would compromise the privacy and data of Chinese users.
The investigation jeopardizes a substantial source of income for Nvidia, which made $17 billion from sales to China in its fiscal year that concluded on January 26—13 percent of total revenue.
With firms like Huawei creating processors that can compete with the H20’s capabilities and Beijing pushing the technology industry to become more self-sufficient, China has increased efforts to build local AI chip alternatives.
US-China Chip Supply Stability
US bans on sophisticated chipmaking equipment, such as lithography machines that are necessary for chip fabrication, have limited the capacity of local firms to increase output.
Despite long-standing concerns in Washington that Beijing would use US AI capabilities to boost its military, US President Donald Trump hinted on Monday that he might let Nvidia to sell a reduced-scale version in china.
On Tuesday, China’s Ministry of Foreign Affairs expressed its hope that the United States will take action to ensure the stability and seamless functioning of the world’s chip supply chain.
Last week, the Trump administration affirmed a historic agreement with Nvidia and AMD that would provide the US government 15% of the profits from the sale of certain cutting-edge chips made in China.
AMD AI accelerators are also impacted by China’s updated chip-avoidance guidelines, according to Bloomberg. However, it was unclear whether any notifications from Chinese authorities made particular reference to AMD’s MI308 microprocessor.
When asked for comment outside of normal business hours, AMD did not reply.