China tech firms buy over 1 million Nvidia chips despite push to switch

In short: Chinese tech companies are buying large numbers of Nvidia gaming and workstation chips to meet AI computing needs, even though China is trying to rely less on Nvidia.

What's going on

Chinese technology companies have bought more than 1 million Nvidia chips this year, according to the Financial Times, citing multiple industry insiders. These are mainly gaming and workstation chips, not the top-end chips usually used to train advanced AI systems.

The purchases highlight a gap between how many chips China needs and how many it can get from local suppliers. Industry insiders told the FT that domestic supply could reach up to 3.5 million AI chips this year, but total demand is estimated to be more than 5 million. Next year, demand could more than double to over 10 million, which would widen the shortfall.

US export controls have limited which advanced Nvidia AI chips can be sold to China. To work around this, Chinese firms are repurposing chips that still comply with the rules. Think of it like using a high-end office computer to do some of the jobs normally handled by a small server room.

One reason Nvidia remains attractive is its Cuda software system, which many developers already know. Switching to alternatives like Huawei’s Cann can take time because teams need to rewrite and test their code.

What to watch

Nvidia is reportedly preparing a new workstation chip called the RTX Pro 5500 for China, and Chinese companies have indicated interest in ordering more than 2 million units, the FT reported. Regulators in China are also said to be asking companies whether they really need this chip. At the same time, Huawei, Alibaba, Baidu, and others are increasing their own chip output, but the key question is whether supply can catch up with demand before the end of the decade.

Source: Financial Times