Beijing has reportedly issued a directive banning foreign artificial intelligence (AI) chips in state-funded data centers amid an intensifying U.S.-China tech war.
State Projects Under 30% Completion In Focus
China's government has mandated that new data center projects receiving state funding must exclusively use domestically produced artificial intelligence chips, Reuters reported on Wednesday.
The directive targets data centers that are under 30% complete, requiring them to eliminate all foreign chips or abandon any plans to acquire them, according to the report. Projects nearing completion will be evaluated individually on a case-by-case basis.
According to another report on Tuesday, China had boosted subsidies for major data centers, slashing their energy bills by up to 50% to support domestic chipmakers and strengthen global competitiveness. This move was aimed at supporting domestic chipmakers and strengthening China’s global competitiveness.
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Nvidia Caught In The Crosshairs
The use of advanced AI chips in China, including those manufactured by Nvidia (NASDAQ:NVDA), has been a point of contention with the U.S. The recent directive could potentially hinder Nvidia’s aspirations to recapture market share in China, while offering domestic rivals like Huawei a chance to increase their chip sales.
In mid-October, Alibaba Group Holding (NYSE:BABA) unveiled a new computing pooling system named Aegaeon, designed to cut reliance on Nvidia GPUs for AI models by an impressive 82%.
At the same time, President Donald Trump had declared that Nvidia’s advanced Blackwell AI chip would not be available for “other people.” This decision was made amid concerns about the potential sale of a scaled-down version to China.
Despite these challenges, Nvidia’s CEO Jensen Huang remains optimistic about the potential to resume sales of the chipmaker’s advanced chips in China. However, he emphasized the importance of addressing U.S. national security concerns.
Apart from Nvidia, other U.S. chipmakers supplying data center chips to China include Advanced Micro Devices (NASDAQ:AMD) and Intel (NASDAQ:INTC).
Price Action: Over the past year, shares of Nvidia, AMD, and Intel surged 42.01%, 76.51%, and 58.79%, respectively, as per data from BenzingaPro.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
