For years, the Chinese tech industry has been dependent on the US and its allies for the advanced semiconductors — colloquially known as "chips" — that undergird the AI industry.
As the "AI race" has heated up to a fever pitch, chips have become its chief commodity — and bottleneck, as companies compete to build out the infrastructure they believe will run a multi-trillion dollar market.
At the moment, the undisputed leader in AI chips is Nvidia, which has rocketed it from modestly-sized gaming hardware outfit to the world's most valuable corporation. If AI is a gold rush, Nvidia is selling shovels.
China was already on the back foot in the race to acquire Nvidia chips, due to years of efforts by various US presidents to curb the People's Republic's access to the cutting edge tech.
Now, the People's Republic is calling the current administration's bluff: earlier today, China's internet authority, the Cyberspace Administration of China (CAC), banned the nation's biggest firms from buying chips from US tech giant Nvidia.
Specifically, the Financial Times reports, the CAC is limiting corporations like ByteDance and Alibaba from ordering Nvidia's RTX Pro 6000D, a less advanced unit specially designed for the Chinese market to appease president Donald Trump's wishy washy export control rules.
Per the FT, the move affects tens of thousands of RTX Pro units, halting collaborate work that several companies had already ordered with Nvidia suppliers.
In its place, a homegrown alternative — the Huawei Ascend 910c — is likely to become the go-to AI chip for Chinese tech companies. That model began mass production back in April, as Trump waffled on export restrictions of a previous Nvidia chip.
Now, one Chinese tech executive told the FT that "the message is now loud and clear."
"Earlier, people had hopes of renewed Nvidia supply if the geopolitical situation improves," the source continued. "Now it's all hands on deck to build the domestic system."
Exactly what that means for Nvidia isn't yet clear, but it's probably not good. The chipmaker has been sitting pretty as the most valuable company in the world, worth over $4 trillion. Its stocks fell nearly 3 percent on Wednesday after the CAC's decision became public, the latest in a string of setbacks for the company's aspirations in the Chinese market.
Beijing had previously discouraged companies from buying Nvidia chips on patriotic grounds, after US commerce secretary Howard Lutnick said he hopes to keep China "addicted" to American tech.
One thing's for sure: it's a ballsy move for China, which is betting big on AI in a huge national push to inject the tech into everything from manufacturing to meteorology. But it is in character for the country, which has rapidly achieved remarkable economic resilience in markets ranging from agriculture to automobiles to rare earth metals.
That gives it room to flex on the world stage. Since Trump's first tranche of tariffs went into effect in February, Beijing has halted the import of US soybeans, choosing to source the agricultural good from farmers in South America instead. In a typical year, Chinese importers purchase over half of all soybeans grown in the US. This year, however, farmers are losing out on billions in sales.
At the moment, it's hard to imagine China ever achieving that type of dominance in the winner-takes-all chip sector — but then again, this is a country that built a city of eighteen million faster than New York City could expand a subway line.
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