Nvidia faces a potential chip shortage as Chinese companies scramble to place substantial orders for its H20 chips ahead of a US sales ban. Reports indicate that ByteDance, Alibaba Group, and Tencent Holdings have ordered about $16 billion worth of these chips intended for AI workloads in just the first quarter of 2025.
The looming US government restrictions may compel Nvidia to prioritize these orders, causing delays for other customers in the US and Europe who have also been waiting for Nvidia’s increasingly limited supply. While the H20 chip is the most potent processor Nvidia is currently allowed to sell in China due to US export controls, the situation may worsen as Beijing considers more stringent regulations on foreign chip sales to minimize Nvidia’s market dominance.
The high demand for H20 chips began following the introduction of DeepSeek, a Chinese startup’s economical open-source AI model. Despite being reported as significantly slower than Nvidia’s latest Blackwell chips, the H20 is specifically tailored to meet US export compliance and is actively utilized for AI training by numerous Chinese enterprises.
Experts suggest that while Nvidia may allocate more resources towards manufacturing the H20 to satisfy Chinese demand, this will likely not impede the supply of other chips destined for the US and European markets. The Blackwell chips, which cater to these markets, are produced using different technology from the Hopper architecture of the H20. However, challenges remain as larger clients with significant orders often take precedence, causing smaller companies to face longer wait times for their chip supplies.
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