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Updates at 00:30 ET (04:30 GMT) with additional context on China chips, Nvidia
Investing.com-- Chinese technology stocks, especially chipmakers, rose sharply on Monday as Beijing’s scrutiny of Nvidia chips sparked increasing bets on locally-sourced processors for artificial intelligence development.
Chip stocks were also encouraged by major AI developer DeepSeek unveiled a model optimized for Chinese-made chips.
Semiconductor Manufacturing International Corp (HK:0981), the country’s biggest chipmaker by foundry volume, soared as much as 6% in Hong Kong trade, while major AI chips maker Cambricon Technologies Corp Ltd (SS:688256) surged 8.6% to a record high in Shanghai trade. Hygon Information Technology Co Ltd (SS:688041) rallied nearly 15%.
Hua Hong Semiconductor Ltd (HK:1347) lagged, falling 3%.
Chinese chip stocks were on a tear since last week, especially after reports said NVIDIA Corporation (NASDAQ:NVDA) had ordered some of its suppliers to halt manufacturing its China-specific H20 chip, sales of which were recently reapproved by Washington.
Nvidia’s move came as Beijing ramped up its scrutiny of U.S.-made chips, warning local AI developers against using foreign chips for critical processes. China had earlier in August also asked major AI developers including Tencent (HK:0700) and Bytedance to justify their purchases of the chips.
Bets on local chips were furthered by DeepSeek unveiling an updated V3 model which it billed as being adapted for “the next generation of domestic chips.” The company is regarded as a bellwether for Chinese AI development after making waves with its R1 and V3 models released at the beginning of the year.
Still, recent reports said DeepSeek had delayed the release of a new AI model due to issues with training on Huawei-made chips. Huawei is at the forefront of China’s efforts to develop locally-sourced AI chips, and is considered as a major competitor for Nvidia.
But the company’s flagship Ascend line of AI chips has largely lagged rival offerings by Nvidia in Chinese sales, with the H20 remaining the more preferred chip by Chinese AI developers.
Nvidia orders suppliers to stop H20 production; Q2 results in focus
Reports last week said Nvidia had asked some of its suppliers, including Amkor Technology Inc (NASDAQ:AMKR) and Samsung Electronics Co Ltd (KS:005930), to halt production of components for its H20 chips.
The move came as China flagged information and security risks over the use of the H20 and other foreign-made chips.
Nvidia received approval to resume sales of its H20 in China in late-July, after Beijing and Washington agreed to temper their bitter trade feud. Chinese sales of the H20 were essentially blocked by Washington in April.
China still represents a major market for Nvidia, with CEO Jensen Huang seen constantly attempting to appease Beijing in recent months. Huang had earlier largely dismissed concerns over security lapses or backdoors in Nvidia chips.
Still, a block in Chinese sales could hurt Nvidia’s top line, with the AI major set to report its second-quarter earnings later this week. The company is widely regarded as a bellwether for AI demand.