Chinese officials have summoned domestic companies, including major tech firms Tencent and ByteDance, over their purchases of Nvidia’s H20 chips, demanding explanations and expressing concerns about information risks.
The Cyberspace Administration of China (CAC) and other agencies have also held meetings in recent weeks with Baidu and smaller Chinese tech companies.
According to sources speaking to Reuters, Chinese officials asked the companies why they needed to purchase Nvidia chips when they could buy from domestic suppliers.
One of the sources said that officials also voiced concerns that documents Nvidia requires companies to submit for US government review could contain sensitive information, including customer data.
However, the individuals, who wished to remain anonymous because the meetings were not public, said the companies were not instructed to halt purchases of H20 chips.
Nvidia stated on Tuesday that the H20 chip is “a product not used for military purposes or government infrastructure.”
It was also stated that China has a sufficient supply of domestic chips to meet its needs. “Just as the US government does not buy chips from China, China is not and has never been dependent on American chips for government activities,” the statement added.
Baidu, ByteDance, Tencent, and the CAC did not immediately respond to requests for comment.
On Tuesday, Bloomberg News also reported that Chinese officials have warned domestic companies against using Nvidia’s H20 chips, particularly for government-related purposes.
Citing people familiar with the matter, the report stated that several companies received official notices prohibiting the use of the H20—a less advanced chip—in work related to government or national security, whether by state-owned or private enterprises.
According to a separate report by The Information, the CAC instructed ByteDance, Alibaba, and Tencent to completely halt their purchases of Nvidia chips within the last two weeks, citing data security concerns.
The report from The Information added that the CAC’s directive was communicated during a meeting between the regulatory body and more than a dozen Chinese tech companies, immediately after the Trump administration lifted export restrictions on H20 chips.
Reuters could not immediately verify these reports, and Alibaba did not respond to a request for comment.
SMIC, the largest contract chip manufacturer, saw its shares rise by 5% on Tuesday amid expectations of increased demand for locally produced chips.
However, even without a definitive ban, the concerns raised by Chinese officials could threaten Nvidia’s recently regained access to the Chinese market, as Chinese companies strive to act in alignment with regulators.
Nvidia specifically designed the H20 for China after US export restrictions on more advanced AI chips took effect in late 2023. The H20 has since been the most advanced AI chip that Nvidia is permitted to sell in China.
Earlier this year, US officials effectively banned its sale to China but reversed this decision in July following an agreement between Nvidia and the Trump administration.
Last month, China’s cyberspace regulatory agency summoned Nvidia representatives, demanding they explain whether the H20 poses backdoor security risks that could affect the data and privacy of Chinese users.
Yuyuan Tantian, an outlet affiliated with China’s state broadcaster CCTV, published an article on WeChat over the weekend arguing that H20 chips pose security risks and lack technological sophistication and eco-friendly features.
This scrutiny threatens a significant revenue stream for Nvidia, which generated $17 billion from sales in China in the fiscal year ending January 26. This figure represents 13% of the company’s total revenue.
China has accelerated its work on domestic AI chip alternatives, with companies like Huawei developing processors to rival the H20’s performance, as Beijing urges its technology sector to become more self-sufficient.
However, US sanctions on advanced chipmaking equipment, including the lithography machines necessary for chip production, have restricted the capacity of domestic manufacturers to scale up production.
On Monday, US President Donald Trump indicated that he might allow Nvidia to sell a scaled-down version of its advanced Blackwell chip in China, despite objections.
China’s Ministry of Foreign Affairs stated on Tuesday that it hopes the US will take action to protect the stability and smooth operation of the global chip supply chain.
Last week, the Trump administration approved a controversial agreement with Nvidia and AMD in which they agreed to give 15% of the revenue from sales of certain advanced chips in China to the US government.
