December 10, 2023

Baidu, a longtime customer of US artificial intelligence chip maker Nvidia, is now buying AI chips from Shenzhen-based Huawei.

In August, the Chinese internet giant placed an order for 1,600 Huawei Ascend 910B AI chips, intended for 200 servers, according to Reuters. More than 60% of the order was filled by October.

The US keeps tightening restrictions on tech exports to China, including Nvidia chips. Earlier this year, reports suggested that Chinese internet titans were rushing to acquire and stockpile Nvidia chips to train their AI models and run their data centers. The trillion-dollar, Santa Clara, California–based company has received upward of $5 billion in orders for its A800 and A100 chips from China through 2024.

After all, Nvidia’s chips are the most powerful on the market.

However, this 450 million yuan ($61.83 million) chip deal between Baidu and Huawei, albeit small, reveals that another strategy is in play. As Chinese companies lose faith in continued access to US chip makers, they’re seeking out non-US suppliers.

A brief timeline of restrictions on Nvidia chip imports to China

October 2022: The US Commerce Department bars companies from supplying advanced chips and chip-making equipment to China. The goal is to curb China’s ability to produce cutting-edge chips for weapons and other defense technology, not to hit its consumer electronics industry, Washington claims. Nvidia’s A100 and H100 chips are affected.

November 2022: Nvidia debuts the A800, a pared-down version of the A100, to bypass export restrictions.

March 2023: Nvidia releases the H800 as an alternative to the banned H100 chips for export to China. Its performance is in line with parameters outlined by the Commerce Department.

October 2023: New rules immediately restrict the export of even the made-for-China A800 and H800 chips. Nvidia was supposed to have another 30 days to ship more orders, but that plan went out the window.

Quotable: China export curbs are bad for US business

“Given the strength of demand for our products worldwide, we do not anticipate that additional export restrictions on our data center GPUs, if adopted, would have an immediate material impact to our financial results. However, over the long term, restrictions prohibiting the sale of our data center GPUs to China, if implemented, will result in a permanent loss of an opportunity for the US industry to compete and lead in one of the world’s largest markets.”

Nvidia CFO Colette Kress during an Aug. 24 earnings call 

Nvidia chips in China and beyond, by the digits

20-25%: China’s revenue share of Nvidia’s data center business, which grew 171% year-over-year last quarter, generating more than $10 billion

$20,000: Cost of an Nvidia AI chip on the underground market in China this past June. That’s double the retail price

$1 billion: Total bill when China’s biggest internet players—Alibaba, Baidu, ByteDance, and Tencent—splurged to buy about 100,000 of Nvidia’s A800 processors in August

70%: Market share of AI chips held by Nvidia globally

Fun fact: The cousin connection at two chip giants

The chief executives of Nvidia and rival AMD—Jensen Huang and Lisa Su—are cousins with roots in Taiwan. Su, who is Huang’s uncle’s granddaughter, admitted that the two are “distant relatives” on the sidelines of a Consumer Technology Association (CTA) event in 2020. Huang and Su both immigrated to and grew up in the US, but they never crossed paths.

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