Tech war: Nvidia sampling alternative AI chips to China as US restrictions take a toll there

US chip giant Nvidia said it has started shipping alternative samples of permissible AI chips to Chinese customers, as Washington’s restrictions on sales of advanced chips to the mainland begin to take a toll on its business in China.

Nvidia reported upbeat results for its fourth quarter ended January 28 on the back of robust demand worldwide for its data centre graphics processing units (GPUs), with revenue up 265 per cent year on year to US$22.1 billion, including US$18.4 billion generated from the data center segment.

But China was an exception. “Growth was strong across all regions except for China, where our data center revenue declined significantly following the US government export control regulations imposed in October,” Nvidia’s chief financial officer Colette Kress said in an earnings conference call with analysts on Wednesday.

Kress said Nvidia has started shipping alternative GPUs that do not require a licence for the Chinese market under the tighter export regime, adding that the firm has not received licences from the US government to ship restricted products to China.

She expects China to represent a mid-single-digit percentage of its data centre revenue in the next quarter, flat with the fourth quarter.

Nvidia has been among the most-affected US companies after the US Commerce Department tightened export controls in October, citing national security concerns.

While Nvidia’s net profit skyrocketed 581 per cent to US$29.8 billion in the 12 months ended January 28, its prospects in China remain under a cloud. The trade sanctions prevent Nvidia from exporting to China its advanced GPUs, such as the A100 and H100, which have become sought-after for artificial intelligence (AI) training. Its tailor-made A800 and H800 GPUs, developed as workarounds for Chinese clients in 2022, were blocked by the updated US controls last October, leading to new alternatives such as the H20, L20 and L2 GPUs.