Nvidia and China; EU and rare earth magnets; US-China; Xi praises work on 80th anniversary commemorations
The Financial Times reports that the Cyberspace Administration of China (CAC) told PRC firms to stop testing and cancel orders for Nvidia’s RTX Pro 6000D chip. Nvidia has already said it is not expecting PRC orders for the H20, another chip modified to meet US export control thresholds. The FT wrote that:
Beijing’s regulators have recently summoned domestic chipmakers such as Huawei and Cambricon, as well as Alibaba and search engine giant Baidu, which also make their own semiconductors, to report how their products compare against Nvidia’s China chips, according to one of the people with knowledge of the matter.
They concluded that China’s AI processors had reached a level comparable to or exceeding that of the Nvidia products allowed under export controls, the person added.
If that is the case, why would PRC authorities want PRC firms to spend money with a US company rather than PRC ones?
The headline of the story is “China bans tech companies from buying Nvidia’s AI chips,” but it is not clear if policymakers have decided they no longer want any Nvidia AI chips, or just not the hobbled ones that they believe can be replaced by PRC chips. There is still a chance this is part of a play to get the Trump Administration to approve the B30, the modified Blackwell chip that is many times more powerful than the H20, perhaps even the full Blackwell, as well as relaxation on export controls around HBM (High Bandwidth Memory). Any US-China trade deal would likely include large purchase commitments from the PRC side, and a massive chip order promise could help sway President Trump.
Nvidia CEO Jensen Huang sounded a bit resigned in response to the FT story:
In response to a question on the FT report, Huang said Wednesday that “we can only be in service of a market if the country wants us to be.”
“We probably contributed more to the China market than most countries have. And I’m disappointed with what I see,” Huang said. “But they have larger agendas to work out between China and the United States, and I’m understanding of that.”
It comes after a tumultuous few years for Nvidia’s business in China, which Huang described as “a bit of a rollercoaster.”
“We’ve guided all financial analysts not to include China” in financial forecasts, Huang told reporters Wednesday at a press briefing in London. “The reason for that is because that’s largely going to be within the discussions of the United States government and Chinese government.”
If Xi has decided to block future purchases of any Nvidia AI chips, then we can look back on the April Politburo study session as an obvious indicator - April Politburo Study Session on AI is bad news for Nvidia:
Xi Jinping emphasized that to seize the initiative and gain the advantage in the AI field, breakthroughs must be achieved in fundamental theories, methods, tools, and more. We must continuously strengthen basic research, concentrate resources to overcome challenges in core technologies such as high-end chips and foundational software, and build an independent, controllable, and collaboratively functioning AI foundational hardware and software system [集中力量攻克高端芯片、基础软件等核心技术,构建自主可控、协同运行的人工智能基础软硬件系统]. We should use AI to lead a paradigm shift in scientific research and accelerate technological innovations and breakthroughs across various fields.
The PRC wants to decouple from US technology, for obvious reasons, and it wants to accelerate the pace of that decoupling. We should not be surprised if such a clear signal from the top leads bureaucracies and industries to move faster than many expected.
If the PRC says no to the better Nvidia chips, then that should shut the door on the latest variant of the “China fantasy” that Nvidia, Howard Lutnick and other officials have been pushing that Nvidia should be allowed to keep selling to China so that that the PRC remains “addicted” to US technology and products.
There is a long history of the failure of that argument when it comes to technologies the PRC has deemed strategic, and there is little to reason to believe it will not fail again, especially given the patchwork of US semiconductor export controls and the increasing marginalization of those in the US government, at least those who have not already been purged, who advocate for closing many of the glaring loopholes in those semiconductor export control policies.
For Nvidia, this is a binary situation. If this is a PRC ploy to get the US to allow exports of the better chips, beyond the gray market smuggling that is ongoing, then the company can add China revenue and market opportunity back into its earnings guidance, and that should help the stock. But if Trump approves exports of the B30 or the full Blackwell and the PRC government still does not allow its companies to buy them in bulk, even though they are better than anything the PRC firms have or will be able to produce for many years, then the China market really is closed to Nvidia.