Nvidia shares fell in early trading as signs mounted that China is pressing ahead with an artificial intelligence buildout relying less on the US chip designer. The shift includes reported guidance for domestic tech firms to avoid Nvidia’s H20 processors and growing momentum for homegrown chip efforts.
China’s AI push tests life beyond Nvidia
Sherwood News reported that Nvidia, valued near $4 trillion, dropped more than 3% after The Wall Street Journal said Alibaba is developing a domestically manufactured chip for AI inference. According to The Wall Street Journal, the chip targets inference tasks and is the latest sign China aims to reduce reliance on Nvidia and US technology.
Nvidia has emphasized China’s importance. On the company’s recent earnings call, CEO Jensen Huang described China as a $50 billion opportunity expected to grow 50% annually. Yet China has reportedly told leading tech companies to forgo H20 purchases, citing data security concerns—a claim Nvidia has denied. Sherwood News noted this appears aligned with Beijing’s broader goal of insulating its AI trajectory from US policy shifts.
Export curbs and shifting supply lines
Nvidia was effectively shut out of China’s AI market from mid-April due to export curbs and only received licenses to ship H20 processors in August. Sherwood News also reported the company recently halted production of the chips, suggesting China’s directive is having impact. Without access to the most advanced technology, the report said China may need to compensate for capability gaps with volume.
Domestic chipmakers gain investor attention
Investor focus in China is tilting toward local suppliers. Cambricon’s stock surged 15% to a record earlier this week after reporting strong sales growth, with its share price more than doubling in under three weeks. According to the Financial Times, officials have told SMIC, the country’s largest domestic foundry, to allocate some additional capacity to Cambricon rather than giving all availability to Huawei Technologies, which is currently China’s most advanced AI chip developer.
As China’s ecosystem reorients around domestic capabilities, global chip markets are reacting. According to Sherwood News, the developments underscore a potential AI boom that does not place Nvidia at the center, even as the US firm continues to court demand in the world’s second-largest economy.
