Nvidia Faces Setback as China Shifts Focus to Domestic AI Chips

Nvidia's stock recently experienced a decline following Beijing's directive urging Chinese AI companies to minimize their reliance on Nvidia's H20 chips. This move has bolstered local competitors like Cambricon, SMIC, and Naura Technology Group, whose shares have surged.

ByteDance, a significant player in the AI sector, planned to utilize Huawei's Ascend 910B chips for AI model training, although these chips are primarily designed for inference. ByteDance has denied these reports.

Despite US export restrictions delaying Huawei's AI chip advancements, Nvidia's stock has still more than doubled this year. However, the Chinese government's push for self-sufficiency in critical technologies has led to a significant shift towards domestic chipmakers.

As a result, companies are stockpiling Nvidia chips while simultaneously investing in local alternatives. This strategic pivot underscores China's intention to reduce dependency on US technology and strengthen its local AI industry.