Why China is giving Nvidia the cold shoulder

And how a thriving black market undermines Beijing's message of self-reliance

After years of railing against America’s economic and technological containment, and with President Trump’s release of Nvidia’s H20 chips meeting widespread criticism in the US in July, it’s curious that it is now Beijing authorities rejecting Nvidia. The Cyberspace Administration of China has called in Nvidia representatives to explain potential backdoor risks, warned major Chinese tech companies about using the H20 and sent letters questioning why they don’t buy Chinese alternatives instead.

All of this goes to the heart of the debate on decoupling, which listeners of Chinese Whispers may remember I featured in February, with the sharp Ryan Fedasiuk, who worked on the export controls in the State Department, and the physicist/founder/investor Steve Hsu. Ryan argued that export controls work; Steve countered that they’ve only spurred on Chinese tech self-reliance:

Bear in mind that Chinese chips are still catching up to Nvidia’s top range – a good way to think about it is that Nvidia is producing Formula One cars, but Huawei and Cambricon (a name you will hear a lot more about in the coming months) are making Porsches. They’re fast for the road, but still a long way off the podium.

At the time I found both of their arguments persuasive – that there was value in slowing down Chinese progress on a hardware level; and that export controls force private companies to buy from compatriot suppliers, something that the Chinese government had clearly wanted to promote, but was meeting resistance in the private sectors.

The latest Nvidia example is fascinating, because now the chips are available again, but so far, Chinese clients have refrained from buying, according to Nvidia’s latest sales figures. The company is also not expecting any H20 sales in the third quarter, and has reportedly halted production of the chips. In his brilliant Sinocism newsletter, Bill Bishop has been tracking the tos and fros in the tussle.

I write about all of this in my latest Times column:

Now, even though the H20 is available again, Beijing is digging in, aiming to control the AI supply chain from head to toe, starting with its near-monopoly on rare earths. It has grand AI ambitions. Last week, the State Council, China’s de facto cabinet, released its “AI Plus” plan, which set 2035 as the year for AI to be embedded in all corners of Chinese society, from work to how the elderly are cared for.

The boom has already started: after shedding jobs for three consecutive years, internet companies from Alibaba to Baidu are going on AI hiring sprees; transactions in AI products have increased by 76 per cent year on year. When I was there in April, DeepSeek was already a household name, with users (blocked from using ChatGPT) quickly adopting it as their favourite search engine.

But the highlight of the research for this column was a long conversation I had with a source inside the industry. He is a veteran of both the American and Chinese industries, and now works for a major Chinese chip designer. He directs me to the thriving black market for Nvidia chips in China. On the surface, he said, Chinese companies are not flocking to Nvidia. That’s because privately, ‘whatever you want, you can get. Even the most advanced chips’ – referring to Nvidia’s top range Blackwell and Hopper series. His best line: ‘That’s the Chinese way: when we come across a red light, we go around it.’

In my column I write more about what we know about the size of this black market, which must only be scratching the surface. The interesting takeaway for me is: don’t take Beijing’s message of self-reliance at face-value.

I actually visited Huawei’s campus in Dongguan earlier this year. It’s a 3.5 square mile campus complete with three internal train lines (to save staff walking), split into various ersatz European facades. I will write more about its unbelievable eccentricity another time, and what it says about the company’s ambitions. Now, the company’s star continues to rise with the promotion of homegrown chipmakers:

I had to take a picture in front of Huawei’s take on the Radcliffe Camera, my alma mater Oxford University’s most famous library

What I’ve been up to/reading:

• This morning I joined BBC Radio Four’s Today programme, with the esteemed Nigel Inkster (a friend of Chinese Whispers), talking about the Shanghai Cooperation Organisation’s meet. You can listen here, from an hour 36 minutes in.

• I found this letter from Bill Burns, former director of the CIA, to America’s sacked public officials, touching and pertinent. It’s a bug bear of mine when China-sceptic politicians get rid of China expertise in their governments, because it’s just so counterproductive. I’ve written about it before in the context of Liz Truss, who wanted to shut the UK’s Great Britain China Centre.

• I also thought readers wouldn’t want to miss the most delightful moment captured, presumably, by CCTV, of a Chinese man who lost a chess match, but then sat for four hours analysing it, even in the rain and in the face of his very very irate wife. Are any readers Chinese chess aficionados and can explain why this board presented such a puzzle?