According to CEIC, the U.S has hiked the price of an integrated circuit from less than $1 to $4 (between the period of 2017 – 2025). China Cyberspace Administration (CAC ), which is China’s main internet regulatory body, has passed strict orders to big tech companies to stop buying Nvidia’s AI chips. Chinese tech giants like ByteDance and Alibaba, following the notice, will have to end their ties with American AI chip-making companies. Why has it come to light now? Another trade war between the countries? Or a simple move towards self-dependence? Learn more.
Why Did China Ban Nvidia’s Chips?
- Nvidia is a renowned AI chip-making company in the world. Its chips are widely used in training advanced artificial intelligence systems. Several big companies like DeepSeek, Tencent, Alibaba, and more are customers of Nvidia.
- The U.S. government has, for years, restricted China’s access to powerful technology because of security concerns. Additionally, in April, Trump pushed a 145% U.S. tariff on Chinese goods (later that number dropped to 30%).
- In response to all the trade uncertainties, China is encouraging its companies to slim down their dependency on U.S. technology to zero. So, the companies are switching to local alternatives.
The Chip Affected
- The ban has specifically targeted Nvidia’s RTX Pro 6000D.
- Nvidia designed and makes these chips specially for China because the U.S. has already restricted the sale of its powerful models to China.
China’s Earlier Restrictions on Nvidia
- Just before this ban, China already set rules (discouraging) for companies from buying another Nvidia chip made for them, called the H20.
- The new ban (stricter) is to halt all kinds of purchases totally. The demand was down for Nvidia, and now the ban is hurting the company.
The Companies Involved
- Well, the major tech companies, including ByteDance (owner of TikTok) and Alibaba (e-commerce and cloud giant), use the RTX Pro 6000D.
- Furthermore, the ban doesn’t just apply to the current deal, but also to deals in progress. This is going to affect companies on both sides, as many have planned to buy tens of thousands of these chips.
- The companies have already started working with Nvidia’s server suppliers for integration. However, there’s now a pushback.
Impact on Nvidia
- After the news, the stock price of Nvidia fell by 1% in premarket trading.
- CEO of Nvidia, Jensen Huang, on Wednesday said (quoted by BBC), “There are a lot of places we can’t go to, and that’s fine.” He further added that he is “disappointed” and will remain “patient” and “support the US” as they resolve the issue.
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