China is reportedly pressuring major tech companies like Alibaba and ByteDance to reconsider their orders for Nvidia’s H20 AI chips even as Chinese regulators have asked tech firms to explain why they are purchasing Nvidia’s chips – which US President Donald Trump called ‘obsolete’ – instead of using domestic alternatives, suggesting that they want the Chinese tech companies to downsize their orders of H20 chips. According to a report by Financial Times, this scrutiny has led some of the main buyers of the H20 to cut their orders. The development comes as various Chinese companies have been told to avoid using these AI chips, particularly for government-related projects.Citing three people familiar with the situation, the report said that the Ministry of Industry and Information Technology (MIIT) is among Chinese regulators who have asked tech firms to explain why they are purchasing Nvidia’s chips instead of using domestic alternatives.“It’s not banned but has kind of become a politically incorrect thing to do,” a Chinese data center operator was quoted as saying.

What it means for Nvidia and its H20 sale plans

This move complicates the recent export arrangement Nvidia made with the Trump administration, which allowed the chips to be sold in China under the condition of a revenue-sharing agreement.A report from Bloomberg claimed that Chinese authorities had sent notices to companies discouraging the use of H20 chips, especially for government or security-related projects. The push is part of a broader effort by Beijing to promote its own domestic chipmakers, such as Huawei and Cambricon, which have been gaining market share since US export restrictions were put in place.The Trump administration, which had previously halted the sale of Nvidia’s H20 chips to China in April, granted clearance for resumed shipments last month. In a statement, Trump described the H20 as “obsolete,” claiming that China “already had it.” He added, “So I said, ‘Listen, I want 20% if I’m going to approve this for you, for the country’.”