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Updates at 21:00 ET (01:00 GMT) with context on U.S.-China trade, Nvidia
Investing.com-- China’s move to restrict sales of Nvidia’s China-specific, H20 artificial intelligence chip, was prompted by remarks from U.S. Commerce Secretary Howard Lutnick that Beijing found “insulting,” the Financial Times reported on Thursday.
The Cyberspace Administration of China, the National Development and Reform Commission, and the Ministry of Industry and Technology had begun dissuading local companies from buying the H20 in response to comments from Lutnic in July, the FT report said, citing people with knowledge of the regulatory action.
The comments in question were made by Lutnick in a CNBC interview on July 15, which took place a day after the Trump administration lifted restrictions on the sales of some AI chips in China.
“We don’t sell them our best stuff, not our second-best stuff, not even our third-best,” Lutnick had told CNBC. “You want to sell the Chinese enough that their developers get addicted to the American technology stack, that’s the thinking,” he added.
Some of China’s senior leaders had found the comments “insulting,” the FT reported, which in turn sparked efforts to restrict Chinese tech firms from buying the chips.
The move presents sustained sales headwinds for Nvidia (NASDAQ:NVDA), given that the chipmaker still views China as a major market.
Washington had allowed the resumption of Nvidia H20 sales in China after reaching a framework trade deal with Beijing in May and June. Beijing had also resumed exports of rare earth materials in response.
But Beijing had in late-July begun guiding Chinese tech firms to halt new orders for the H20, while also promoting the use of locally-made chips, such as from Huawei.
Beijing had also expressed concerns over remote controls and security lapses in U.S.-made chips-- claims that Nvidia has strongly disputed.
Nvidia CEO Jensen Huang had visited Beijing last month and committed to remaining competitive in China despite tensions with the United States. China represents at least 15% on Nvidia’s overall sales, with the H20 chips being wildly popular among local AI developers.
Majors such as Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), and Bytedance, have even pushed back against China’s promotion of locally made AI chips, citing better performance from Nvidia’s offerings.
The FT reported last week that Chinese AI start-up DeepSeek had delayed the release of a new AI model as training efforts using Huawei chips largely fell through.