China Mandates Local AI Chips for Projects, Threatening Nvidia, AMD, Intel

China has implemented a new mandate requiring state-backed data centers to exclusively use local AI chips for government-funded projects. This directive has significant implications for U.S. chip manufacturers, notably Nvidia, AMD, and Intel.

Details of the New Mandate

The new regulation stipulates that any data center project receiving government funding must utilize Chinese chips. Projects that are less than 30% complete are required to cancel or revise plans involving foreign chips. Meanwhile, projects that are further along will undergo individual reviews.

Impact on U.S. Chipmakers

• Nvidia’s market share in China has plummeted from 95% to zero due to this rule.
• The regulation specifically impacts Nvidia’s H20 model and other high-end chips.
• AMD and Intel also face challenges as their chips are widely used in Chinese data centers.

Several data center projects have already been suspended even before construction began. For instance, a project in a northwestern province intended to utilize Nvidia chips but is currently on hold. This situation underscores the potential slowdown in projects reliant on U.S. technology.

Opportunities for Local Chipmakers

This mandate also opens opportunities for domestic chip manufacturers in China. Prominent firms like Huawei Technologies, along with emerging companies such as Cambricon Technologies, MetaX, Moore Threads, and Enflame, stand to benefit from increased state demand.

Although local chips are currently less powerful than U.S. alternatives, the surge in demand may accelerate their development and capabilities.

Broader Implications for Global AI Trade

The U.S. has restricted advanced chip exports to China, citing security concerns. In response, China is fast-tracking efforts to establish a robust technology base. Both nations are heavily investing to enhance their AI infrastructures as they compete for technological supremacy.

This new policy will diminish U.S. chipmakers’ access to a vital market while potentially decelerating China’s progress in AI. Nevertheless, it allows China to gain more control over its chip supply chain.

Outlook for U.S. Chipmakers

US chip manufacturers, including Nvidia, AMD, and Intel, are likely to face additional hardships under this new policy. The ongoing competition between the U.S. and China in AI technology signifies a dramatic shift in global trade dynamics.