China’s Giving NVIDIA the Side-Eye — H20 AI GPUs Face Major Trust Issues As Beijing Authorities Urge Avoidance

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NVIDIA, the global leader in artificial intelligence GPU supply, may encounter an additional hurdle as they strive to win back Chinese clients and trust, post the US government’s decision to lift the ban on the H20 AI accelerator.

According to Bloomberg’s sources, significant Chinese AI companies are facing pressure from Chinese officials to abstain from acquiring and utilizing NVIDIA’s H20 AI chip, especially in relation to sectors such as government and national security. This applies regardless of whether the firms are state-owned or privately run.

As a researcher, I find myself closely monitoring the situation regarding NVIDIA’s hardware within the AI industry in China. Although there hasn’t been an explicit ban from the authorities, the potential implications are certainly stirring unease among the large Chinese companies that heavily depend on H20 GPUs for their operations.

I’m noticing these are indeed the very chips that President Trump referred to as outdated during his August 11 press conference, where he announced a 15% tariff on any NVIDIA H20 or AMD MI308 AI GPUs being exported to China, due to their significance in AI technology.

The Financial Times reports that Alibaba and ByteDance are being questioned by the Ministry of Industry and Information Technology (MIIT) about their preference for purchasing NVIDIA’s H20 GPUs over those made domestically, such as Huawei’s GPUs.

According to what was reported in the Financial Times article, a Chinese data center operator said that while it’s not explicitly forbidden, it seems to be generally seen as politically incorrect.

A brief history of NVIDIA’s H20 GPU sales in China

It’s worth noting that China’s interest in NVIDIA’s graphics processors hasn’t developed suddenly. Rather, it seems this trend has been gradually growing – possibly even for quite some time.

Over the last five months, the Trump administration has barred the sale of NVIDIA H20 GPUs (which are less potent than their high-performance models) to China, taking away NVIDIA’s export licenses in April. This move caused NVIDIA a significant financial loss of approximately $5.5 billion as they struggled to find means to lift these restrictions.

On July 14th, I got some exciting news as a tech enthusiast – a blog post by NVIDIA revealed a reversal of their AI GPU export ban! It turns out that their CEO, Jensen Huang, managed to strike an agreement with President Trump, paving the way for continued advancements in AI technology.

According to the New York Times, Huang expressed concern that abandoning American-made AI chips as the global standard could be a significant error, effectively leaving China’s massive AI market open for competitors such as Huawei. It appears that the Trump administration heeded Huang’s advice.

Following the lifting of the ban, NVIDIA quickly estimated that an additional 300,000 H20 AI chips from TSMC would be necessary to fulfill China’s demand, on top of the existing stockpile of 600,000 to 700,000 chips, which were already held in reserve, awaiting resumption of sales. It’s important to note that at this point, the export licenses had not yet been finalized.

It was disclosed on August 10th that as part of a seemingly final agreement to secure export licenses, NVIDIA and AMD consented to contribute 15% of their earnings from the sale of AI-focused GPUs to China. To clarify, this refers particularly to the revenue generated from NVIDIA’s H20 and AMD’s MI308 chipsets.

Why is China concerned about the use of NVIDIA’s H20 AI GPUs?

Both Chinese and American officials have voiced apprehensions regarding NVIDIA’s H20 chips. U.S. officials, in particular, worry that these advanced GPUs could potentially strengthen China’s military capabilities or provide them with an edge in the artificial intelligence competition.

On the one hand, Chinese officials express worries that NVIDIA’s H20 GPUs might contain hidden elements such as a backdoor, a shutdown mechanism, or spying software designed to transmit data to another nation without the user’s knowledge.

The sudden change in the U.S. government’s policy regarding the sale of H20 GPUs doesn’t make it surprising that Chinese officials might suspect hidden agendas at play.

In an attempt to assuage the fears of the massive Chinese market, NVIDIA published a blog post written by Chief Security Officer David Reber Jr. titled “No Backdoors. No Kill Switches. No Spyware.” Within the post, Reber Jr. explained why this sort of government trickery isn’t a realistic prospect for NVIDIA’s hardware; it seems like something a company that was putting backdoors into its hardware would say, but that’s pure conjecture on my part.

To reduce the possibility of misuse, certain experts and decision-makers suggest implementing “shutdown mechanisms” or internal controls capable of disabling GPUs remotely, without the user’s awareness or approval. Some believe these features may already be in place. However, NVIDIA GPUs do not and should not have such shutdown mechanisms or backdoors.

David Reber Jr., NVIDIA Chief Security Officer

China is similarly mindful that domestic companies in the field of AI chips may be lagging significantly behind their equivalents like NVIDIA, potentially resulting in substantial profits generated by the technology boom being transferred outside of the country to American corporations.

Despite the fact that Chinese customers aren’t currently barred from investing in NVIDIA’s H20 AI GPU, there’s a strong possibility that Beijing might impose restrictions soon. The increasing pressure from China’s Ministry of Commerce (MITT) on major corporations to explain why these chips are being shipped to them suggests that the situation could deteriorate for NVIDIA in the near future.

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2025-08-13 00:41