Chinese Firms Stockpile $12B in NVIDIA AI Chips Before US Sanctions

Chinese technology giants reportedly ordered approximately $12 billion worth of NVIDIA's H20 AI chips in anticipation of U.S. sanctions, according to a recent Nikkei report. Companies including Alibaba, Tencent, and ByteDance placed orders for an estimated one million H20 GPUs before the U.S. government implemented new export restrictions earlier this month. The firms had apparently expected these sanctions since last year and took preemptive action to secure supplies, with billions of dollars worth of chips shipped to China before restrictions took effect in April.

The U.S. restrictions on NVIDIA's H20 chips represent the latest move in ongoing technology export controls targeting China's artificial intelligence capabilities. Reports of supply chain disruptions began emerging in late March, with Chinese server companies warning customers about GPU shortages expected to extend beyond April 20. These shortages likely resulted from major Chinese tech companies over-ordering due to anticipated sanctions, creating a significant stockpile of advanced AI processing hardware within China before the restrictions were implemented.

Despite the substantial orders placed by Chinese firms, sources indicate that their plan to accumulate a year's worth of AI GPUs fell short due to the timing of the new export license requirements. The article notes that Chinese companies have attempted to circumvent direct purchasing restrictions by establishing global subsidiaries to order chips. In response, Taiwan Semiconductor Manufacturing Company (TSMC) has confirmed it is collaborating with the U.S. Commerce Department to identify potentially suspicious orders originating from Chinese entities.

The H20 chip stockpiling adds to China's existing inventory of advanced semiconductors. Earlier reports indicated that Huawei had acquired chip dies before the first Trump administration sanctions in September 2020, potentially enabling production of up to one million Ascend 910C AI GPUs. However, these chips utilize manufacturing processes significantly less advanced than the latest TSMC products, which rely on extreme ultraviolet (EUV) chip manufacturing tools that remain inaccessible to Chinese manufacturers under current U.S. export controls.

The ongoing semiconductor restrictions highlight the complex technological competition between the United States and China. The Biden administration had previously implemented export controls on advanced chips, and the current Trump administration has continued and expanded these policies. The restrictions reflect bipartisan concerns about national security implications of advanced AI technology transfers to China, while Chinese companies continue seeking ways to develop technological self-sufficiency in response to these export limitations.