Why Beijing is Freezing Nvidia’s Access to the Chinese Market

Beijing has reportedly stopped purchasing yet another AI chip from Nvidia and has completely frozen it from the market. Movement industry experts say it reflects the country’s increased confidence in domestic chipmakers and attempts to gain trade leverage.

It was only a few months ago that Jensen Huang announced from China that Jensen Huang would resume sales of its Made-for-China H20 graphics processing unit and reversed the previous halt of exports.

At the time, Huang also revealed its new RTX Pro GPU for the Chinese market, which was tailored to AI smart factories and logistics.

However, Nvidia’s fate was flipped over in August when Chinese regulators reportedly began mandating high-tech companies to halt Nvidia’s H20 purchases until a national security review hold.

According to a Financial Times report on Wednesday, the mission has been expanded to Nvidia’s RTX Pro 6000D chip, preventing the company from selling its products to Chinese customers.

This comes after China’s regulators said Monday that Nvidia added that it would violate the country’s anti-mass laws in accordance with a preliminary investigation and would continue its investigation.

The exact motivation for China’s actions against Nvidia remains unknown, but technology and geopolitical analysts have shown that development is confident in China’s unique ability to make AI chips, and that it behaves as leverage to the US.

The reported reason for Chinese regulators’ intervention in H20 was the need for a national security review over concerns that Nvidia chips could be equipped with specific tracking systems. This is an idea proposed by American lawmakers.

Experts have characterized the move as part of Beijing’s efforts aimed at encouraging Chinese AI companies to explore domestic alternatives, but predicted exports would be cleared due to high demand from Chinese AI players.

Meanwhile, some Chinese AI companies have indicated they will order tens of thousands of RTX Pro 6000Ds, and have begun testing and validation with NVIDIA’s server suppliers until FT reports were asked to halt such activities.

However, regulators in the country blocked access to these NVIDIA chips after summoning domestic AI chip makers and concluded they had reached performance comparable to the products manufactured by US companies.

However, performance is not the only challenge facing Chinese AI chips. Analysts argue that capacity is also a major barrier, and that domestic industries still cannot produce sufficient chips on a large scale.

Reports from FT suggest that Beijing is also confident in this sector, with local shipmakers looking to triple their total AI processor production next year.

“All of these recent actions show that China is far more confident in its domestic sector than before,” said Qingyuan Lin, senior analyst covering China semiconductors at Bernstein.

There are signs that China’s AI ecosystem is ongoing.

Chinese tech giant Huawei announced its new AI computing infrastructure on Thursday using its in-house ascend chips, claiming it is “the most powerful in the world.”

Research firm Semianalysis found in April that Huawei’s latest generation CloudMatrix system was able to outperform Nvidia’s competing AI computing systems in some metrics, despite delivering only about a third of the performance of its Nvidia processors. Huawei has built up its advantages with five times the chips linked.

Meanwhile, Chinese AI startup Deepseek last month suggested that the latest AI models are compatible with the country’s “next-generation” homemade AI chips. China’s Alibaba and Baidu reportedly began training AI models using internally designed chips to partially replace those created by Nvidia.

Still, analysts are skeptical of China’s ability to reduce its dependence on Nvidia chips.

“When it comes to preparing domestic chips in China, I believe it is misleading to suggest that the country can advance AI at the current level without the systematic provision of domestic alternatives and Nvidia.”

Experts suggest that China may be using market access as leverage in trade negotiations with the US, whilst agreeing that it is confident in its ability to compete with Nvidia

“The move is likely to become a negotiation tactic as part of a broader discussion that includes other topics including tariffs. China is undoubtedly trying to encourage and establish silicon self-sovereignty, but in the meantime, it is trying to get the best possible chip,” analyst Aji Kourabi told CNBC.

The US has shown that it may allow even more sophisticated NVIDIA chips to the Chinese market than H20.

Under the Joe Biden administration, advanced chip export controls were increasingly strengthened with the aim of blocking China’s access to the best of American technology. That trend has now been reversed after the first accelerated under the Trump administration.

According to Reva Goujon, director of Rhodium Group, by denying the H20 and RTX Pro, Beijing may be trying to create an opportunity to negotiate access to more advanced GPUs.

She added that it is not a coincidence that she will come into other leveraged buildings by China this week.

“It has to build its own leverage just like Beijing tests Trump’s trade principle,” she said.