The Blubber

Nvidia is developing a version of its new flagship AI chips specifically for the Chinese market, as reported by Reuters. The company is collaborating with Inspur, a major distributor partner in China, to introduce the tentatively named “B20” chips, which are slated for release in the second quarter of 2025. Nvidia has not yet made a formal announcement about this development.

This news has alleviated some investor concerns about geopolitical tensions and increasing trade restrictions. Consequently, Nvidia’s stock price has seen a modest increase, aiding its recovery from last week’s market downturn. Global chip stocks fell last week amid speculation that the White House might impose stricter trade regulations on chip exports to China.

The US government is also considering extending its export controls using the foreign direct product rule (FDPR). This rule allows the US to restrict exports of products made outside its borders if they contain American technology. While intended to safeguard national security, these measures could negatively impact the global AI chip market.

Earlier this year, Nvidia introduced its Blackwell chip series, claiming it can support the development and operation of GenAI applications on trillion-parameter large language models with up to 25 times lower cost and energy consumption compared to its previous generation. The new AI chips for China are expected to be a variant of the Blackwell series.

As the world’s third-most valuable company, Nvidia faces two significant challenges in launching an AI chip in China. The company must navigate US regulations on AI chip exports and ensure that Chinese customers do not view the new product as inferior.

China once contributed a quarter of Nvidia’s data center revenue, aligning with its chip business. However, since the US government began regulating Nvidia’s AI chip sales to China in October 2022, this revenue has decreased. China’s contribution to Nvidia’s revenue has dropped from 26% two years ago to 17% now.

Despite the restrictions, China continues to sell over a million of its H20 AI chips domestically, according to SemiAnalysis, a firm specializing in semiconductor and AI industry research.

Entering the Chinese AI chip market will help Nvidia address the growing competition from local players like Huawei and Tencent-backed startups such as Enflame. Huawei’s Ascend 910B chips pose a significant challenge to Nvidia, but Huawei faces production issues due to US sanctions that have cut off access to advanced chip-making equipment from its primary manufacturer, SMIC.