China has urged domestic companies to avoid using Nvidia Corp.'s H20 processors, particularly in government-related projects, creating new hurdles for the U.S. chipmaker just weeks after the Trump administration reversed restrictions on the product.
Over the past several weeks, Chinese regulators sent notices to a range of firms advising against the H20's use for national security or government work, according to people familiar with the matter. The guidance, while falling short of an outright ban, has already prompted some companies to reconsider orders, the people said. Bloomberg first reported the notices.
Nvidia said Tuesday that the H20 "is not a military product or for government infrastructure" and emphasized that China "has ample supply of domestic chips" for government operations. The chip, designed to comply with earlier U.S. export controls, is the most advanced AI processor Nvidia can sell in China following Washington's approval last month.
Beijing's push also extends to AI accelerators from Advanced Micro Devices Inc., including the MI308, though it remains unclear whether AMD was directly named in the guidance. Both Nvidia and AMD recently secured U.S. clearance to sell scaled-down chips to China on the condition that 15% of related revenue be paid to the U.S. government.
The Ministry of Industry and Information Technology has pressed large Chinese tech firms, including Alibaba Group Holding Ltd. and ByteDance Ltd., to explain why they are ordering H20 chips instead of domestic alternatives. State media has amplified concerns over the H20's security, including speculation about location-tracking and remote shutdown capabilities-claims Nvidia has denied.
Shares in Chinese semiconductor firms surged on the news. Cambricon Technologies Corp. rose by the daily limit of 20%, while top contract chipmaker Semiconductor Manufacturing International Corp. gained 5%, reflecting expectations of higher demand for local products.
The guidance aligns with Beijing's broader campaign to promote domestic technology, especially chips made by Huawei Technologies Co., which competes directly with Nvidia in AI hardware. Huawei's production capacity remains constrained, leaving demand for the H20 in certain AI workloads, particularly inference tasks that require strong memory bandwidth.
President Donald Trump on Monday described the H20 as "obsolete" but acknowledged it "still has a market" in China. Administration officials have said resuming H20 sales is part of a broader strategy to keep China's AI ecosystem dependent on less advanced U.S. technology. Others in Washington have argued the move could strengthen China's computing power and bolster its tech champions.
Commerce Secretary Howard Lutnick has linked the H20 decision to a rare-earth minerals deal with Beijing. Treasury Secretary Scott Bessent said in late July that the "magnet issue" in the talks had been resolved, with the first export licenses for Nvidia's H20 and AMD's MI308 issued shortly afterward.
