Nvidia AI chips under pressure in China as regulators push back: report

Nvidia (NASDAQ:NVDA) does not sell its most powerful chips to customers in China due to restrictions by the U.S. government.

However, Chinese regulators are pushing back and discouraging local companies from purchasing Nvidia’s chips that are allowed, such as the H20, according to a report by Bloomberg on Friday.

Nvidia shares slipped 3% by afternoon trading on Friday.

China’s motive is to grow the market share of its domestic artificial intelligence chipmakers and reduce reliance on U.S. tech, according to the report. Cambricon and Huawei are China’s primary producers of AI processors.

The U.S. chip ban went into effect two years ago as a measure to curb China’s technological abilities.

Nvidia still depends on China as it derived 12% of its revenue, or $3.7B, from China and Hong Kong in its latest quarterly financial report.

“Our data center revenue in China grew sequentially in Q2 and is a significant contributor to our data center revenue,” said Colette Kress, Nvidia’s chief financial officer. “As a percentage of total data center revenue, it remains below levels seen prior to the imposition of export controls.”

Still, the report said several AI companies in China continue to stock up on Nvidia’s H20 chips, despite the government’s decree.