Why China Loves and Fears Nvidia's H20 AI Chip

U.S. export controls on Nvidia's artificial intelligence chips have been at the center of U.S.-China trade negotiations for months, yet it appears China is discouraging its companies from buying one of them: the H20.

- Raffaele Huang & Robbie Whelan

Why?

Sales of the chips to Chinese companies helped get China to agree to reboot its exports to the U.S. of rare-earth minerals used in cars, electronics and other products, according to U.S. officials. In more recent days, the Trump administration extracted an unprecedented 15% cut of chip sales to China by Nvidia and AMD in exchange for granting the companies export licenses, which could result in billions of dollars for the U.S. government.

Beijing wants access to advanced Nvidia chips because its companies need them to help train state-of-the-art AI. The H20 isn't advanced enough to train large AI models, but it is one of the best chips on the market for powering inference, the ability of AI programs to tap their training to respond to user prompts. Still, Nvidia can't sell its most powerful chips used for AI training to China because of U.S. export controls.

Chinese authorities are also worried about becoming too reliant on U.S. technology. They have repeatedly pushed domestic chip users to support Chinese chip makers whenever possible so that—eventually—the country can be self-reliant.

China's Huawei and a few other companies already have chips that are useful for AI inference, similar to what Nvidia's H20 chips can do. But there are other obstacles.