Chinese authorities have summoned domestic companies, including major internet companies Tencent and Bytedance, over the purchase of Nvidia’s H20 chips.
Authorities asked businesses to explain their reasons on Tuesday and expressed concern over the risks of the information, three people familiar with the issue told Reuters.
China’s Cyberspace Management (CAC) and other agencies have also held meetings with Baidu and Chinese tech companies in recent weeks, one of the two and a third source said.
Chinese officials asked companies why they could purchase chips manufactured by US company Nvidia from domestic suppliers, sources said.
Chinese authorities have expressed concern that Nvidia is asking businesses to submit their businesses for review with the US government, according to one source, which can include sensitive information, including client data.
However, those who refused to be identified because the meeting was not publicly disclosed said the companies were not ordered to halt the purchase of H20 chips.
Nvidia said on Tuesday that the H20 chips are “not for military products, they are for government infrastructure.”
“China has adequate domestic chips to meet its needs. We have not relied on American chips for government operations so that the US government does not rely on chips from China,” the statement said.
Baidu, Bytedance, Tencent and CAC did not respond immediately to requests for comment.
Disappointing use
Earlier on Tuesday, Bloomberg News reported that Chinese authorities urged domestic businesses to avoid using NVIDIA H20 chips, particularly for government-related purposes.
Some companies have been issued official notices blocking the use of H20, a low-end chip, primarily for government or national security-related work by state-owned or private companies, the report cites people familiar with the issue, the report said.
In another report, the information reported that Alibaba and Tencent have been ordered by the CAC in the past two weeks to completely suspend the purchase of NVIDIA chips, citing data security concerns.
The CAC directive was reported at a regulatory meeting held with more than 12 Chinese tech companies shortly after US President Donald Trump overturned the H20 chip export curb, according to the information report.
Reuters could not immediately confirm the report, and Alibaba did not respond to requests for comment. Top contract chip maker Smick rose 5% on Tuesday as demand for locally produced chips is expected to increase.
However, even without a complete ban, concerns expressed by Chinese authorities could threaten to restore recent access to the Chinese market as Chinese companies are about to take a step forward with regulators.
NVIDIA designed the H20 specifically for China after the late 2023 saw the export restrictions on advanced AI chips become effective. The H20 was then allowed to sell China’s most sophisticated AI chips.
Earlier this year, US authorities effectively banned the sale to China, but reversed the decision following an agreement between Nvidia and the Trump administration in July.
Threats to revenue streams
Last month, Chinese cyberspace regulators summoned Nvidia representatives to ask the company to explain whether H20 poses a backdoor security risk that could affect China’s user data and privacy.
State media has been increasing criticism of Nvidia recently. Yuyuan Tantian, a member of the state broadcaster CCTV, published an article on WeChat over the weekend, claiming that the H20 chip poses security risks and lacks technological advancements and environmental kindness.
Scrutiny threatens NVIDIA’s significant revenue stream, which generated $17 billion from sales, or $17 billion from sales, for the fiscal year ended January 26th.
China is speeding up its work on alternatives to domestic AI chips as companies like Huawei develop processors that rival the H20’s performance, encouraging the technology sector to become more self-sufficient.
However, US sanctions on advanced chip-making equipment, including lithography machines, essential for chip production, limit the ability of domestic manufacturers to boost production.
On Monday, US President Donald Trump proposed that Nvidia be able to sell scaled versions of the advanced blackwell chips in China despite fears that Beijing could leverage US AI capabilities to charge its troops despite concerns about a deep sitting in Washington.
China’s Foreign Ministry said Tuesday it hoped the US would act to maintain stability and smooth operation of its global chip supply chain.
The Trump administration confirmed an unprecedented deal with Nvidia and AMD last week. This agreed to give the US government 15% of revenue from sales of some advanced chips in China.
China’s updated guidance on chip evasion will also affect AMD’s AI accelerators, reported Bloomberg. However, it was not clear whether the notification from Chinese authorities specifically mentioned AMD’s MI308 chip.
AMD did not respond to requests for comment outside of normal business hours.
