Investing.com-- NVIDIA Corporation’s (NASDAQ:NVDA) China sales could face more pressure from new energy efficiency rules on the use of advanced artificial intelligence chips, which would block purchases by local companies, the Financial Times reported on Wednesday.
The National Development and Reform Commission, China’s top economic planner, is advising Chinese companies to use chips that meet the new energy standards in new data centers and servers, the FT report said, citing official documents seen by the publication.
The documents showed that Nvidia’s H20 chip- a less powerful chip that is authorized by Washington for sale in China- does not meet the new energy rules, the FT report said.
The FT report said that China had also quietly discouraged major tech companies- such as Alibaba (NYSE:BABA), ByteDance, and Tencent- from purchasing the H20 chips.
The rules were imposed last year, but have not yet been enforced strictly, and have so far had limited impact on Nvidia’s China sales.
Nvidia has prepared a solution to alter its H20 chips in compliance with Chinese rules. But this could hurt the chip’s performance and competitiveness, the FT report said. Rivals such as Huawei already make competing chips.
The U.S. had in 2023 imposed strict restrictions on Nvidia and its peers, preventing them from selling their most advanced AI chips in China to block the country’s AI development.
But this appeared to have pushed Chinese developers towards efficiency over processing power, with the recent release of DeepSeek indicating that China still remained competitive in the AI race.
China is a major market for Nvidia, with the company seeing a surge in local orders this year as major Chinese internet firms raced to match DeepSeek.
The company is gradually becoming embroiled in U.S.-China trade tensions, with Beijing having reportedly launched an antitrust probe against Nvidia in late-2024.
Washington is also considering new measures to further block Nvidia sales in China, although this is likely to impact the AI darling’s earnings.