NVIDIA Corporation (NASDAQ: NVDA) could face increased challenges in China due to new energy efficiency regulations targeting advanced AI chips, which may prevent local companies from purchasing its products, the Financial Times reported on Wednesday.
According to official documents seen by the publication, China’s National Development and Reform Commission (NDRC), the country’s top economic planner, is urging Chinese companies to use chips that comply with new energy standards for data centers and servers.
The report highlighted that NVIDIA’s H20 chip, a less powerful model approved by the U.S. for sale in China, does not meet these new energy requirements. The Chinese government has also reportedly discouraged major tech firms, including Alibaba (NYSE: BABA), ByteDance, and Tencent, from purchasing the H20 chips.
While the regulations were introduced last year, they have not been strictly enforced, and have had minimal impact on NVIDIA’s sales in China so far. However, the company is exploring ways to modify its H20 chips to comply with the new rules, although this could potentially reduce the chip’s performance and competitiveness. Rival companies, such as Huawei, already produce competing chips.
The U.S. imposed stringent restrictions on NVIDIA and other tech companies in 2023, blocking the sale of their most advanced AI chips in China to curb the country’s AI development. This shift appears to have pushed Chinese developers to prioritize energy efficiency over raw processing power, as seen with the release of the DeepSeek AI model, which suggests China remains competitive in the AI field.
China is a key market for NVIDIA, with significant growth in local orders this year as Chinese firms rush to compete with DeepSeek. However, the company is increasingly caught in the middle of U.S.-China trade tensions. In late 2024, China reportedly launched an antitrust investigation into NVIDIA, while Washington is considering additional measures to restrict the company’s sales in China—moves that could hurt NVIDIA’s earnings.
Following the Financial Times report, Wall Street’s future showed a slight decline.
Related Topics:
