NVIDIA stock declined following news that the Cyberspace Administration of China instructed major technology companies to cease purchasing its artificial intelligence chips. As the Financial Times stated, regulators have ordered companies such as ByteDance and Alibaba to cancel the orders of the RTX Pro 6000D and H20 chips. Both models were created with the Chinese market in mind to address the previous US export restrictions.
Some companies had already invested heavily in AI and started verifying the suppliers of their servers. This sudden termination changed plans to use NVIDIA products in future AI projects. Additionally, the relocation suggests that Beijing is eager to reduce its dependence on US equipment and expedite the implementation of semiconductors in the country.
These Chinese restrictions follow the implementation of previous limitations, which prohibited the use of NVIDIA H20 chips. Regulators have called upon local chipmakers (Huawei and Cambricon) and large technology companies (Baidu and Alibaba) to evaluate the competitiveness of local processors. Authorities determined that domestically produced AI chips have become as good or even better than those provided by NVIDIA, which remain authorized under the US export regulations.
The change in policy highlights Beijing's interest in becoming technologically independent. Chinese chip manufacturers also hope to produce three times the number of AI processors in 2024, which indicates that they are confident that they can satisfy domestic needs. Industry executives observed that the regulators have a clear message to domestic firms to focus on homegrown technology rather than U.S. imports.
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NVIDIA created the RTX Pro 6000D, which was scheduled for release in China in July, coinciding with the company's visit to Beijing with CEO Jensen Huang. The chip was being introduced as one of the final NVIDIA products to be sold widely in the country. The new directive basically eliminates the possibility, which restricts NVIDIA's potential in one of the largest technology markets globally.
The stock dropped by over 2% in pre-market trade after the report. Analysts caution that long-term limitations will decrease NVIDIA's m