The Cyberspace Administration of China has banned the nation’s largest technology companies from buying Nvidia’s (NASDAQ:NVDA) AI chips, the Financial Times reported.
Shares of Nvidia dipped about 1% premarket on Wednesday.
China’s internet regulator told companies including ByteDance and Alibaba this week to end their testing and orders of the RTX Pro 6000D, Nvidia’s custom-made product for the country, the report added, citing people familiar with the matter.
Nvidia, Alibaba and ByteDance did not immediately respond to a request for comment from Seeking Alpha.
Several companies had indicated they would order tens of thousands of the RTX Pro 6000D, and had begun testing and verification work with Nvidia’s server suppliers, the report noted.
After the companies received the order from CAC, they told their suppliers to stop the work, according to the report.
The ban goes beyond earlier guidance from regulators which focused on Nvidia’s other China-specific chip, H20. It comes after Chinese regulators decided that domestic chips had reached performance comparable to those of Nvidia’s products used in China, the report noted.
China is putting pressure on local tech companies to boost the country’s domestic semiconductor industry and break their dependence on Nvidia so it can compete in an AI race against the U.S.
“The message is now loud and clear,” said an executive at one of the tech companies, as per the report. “Earlier, people had hopes of renewed Nvidia supply if the geopolitical situation improves. Now it’s all hands on deck to build the domestic system.”
Recently, China’s regulators summoned local chipmakers such as Huawei Technologies and Cambricon, as well as Alibaba and Baidu, which also make their own chips, to report how their products compare against Nvidia’s China chips, the report added.
The regulators concluded that China’s AI processors have reached a level equal to or exceeding that of the Nvidia chips allowed under export controls, the report noted.
Nvidia unveiled the RTX Pro 6000D in July during CEO Jensen Huang’s visit to China, when the U.S. company also said Washington was easing its previous ban on the H20 chip.
The RTX Pro 6000D, which the company has said could be used in automated manufacturing, was the last product Nvidia was allowed to sell in China in significant volumes, the report noted.
On Monday, it was reported that Nvidia’s RTX6000D for China had seen tepid demand, with some major Chinese tech companies opting not to place orders. Reportedly, testing of samples showed that the chip’s performance was weaker than the RTX5090 — a chip banned by the U.S. for use in China but which is still available via grey market channels at less than half the RTX6000D’s price of about 50,000 yuan ($7,000).
Nvidia regained permission to sell the H20 in July but shipments have yet to begin. Last week, Nvidia said it has received licenses for several of its key customers in China for the H20 chip but noted that there are some geopolitical situations it needs to work out between the U.S. and China.