Three of China’s biggest tech conglomerates have ramped up orders of a Nvidia chip made specifically for China following the success of DeepSeek, amid speculation the Trump Administration is keen to bolster export curbs.
Tencent, Alibaba and ByteDance have “significantly increased” orders of Nvidia’s H20 chip – made to adhere to a third round of US export controls imposed by the Biden Administration – since the Chinese AI startup burst into the spotlight last month, two sources have told Reuters.
Shares of Tokyo Electron fell nearly 5% today, while Dutch chipmaker ASML‘s stock was down 3% after a report that US officials had discussed further export curbs with their counterparts in Japan and the Netherlands.
ALSO SEE: All Eyes on Nvidia Chips Demand Amid Doubts on AI Outlays
US bid to block advanced chips for China ‘will backfire’
China’s foreign ministry said on Tuesday the US plan of coercing other countries into going after China’s semiconductor industry would backfire.
Such actions by the United States would hinder development of the global semiconductor industry, said Lin Jian, a foreign ministry spokesperson, in a regular press briefing, when asked about the White House’s plan to toughen semiconductor restrictions on China.
In addition to internal needs for advanced AI chips, the three Chinese tech giants provide cloud computing services, which other firms can access and use AI tools.
Smaller companies in sectors like healthcare and education are also purchasing AI servers equipped with DeepSeek models and Nvidia H20 chips, according to a source at one of China’s largest server makers. Previously only deep-pocketed financial and telecoms firms bought servers with AI computing systems, the source added.
US President Donald Trump’s administration is looking at imposing restrictions on the sale of the H20 chip to China. While the threat of further controls could be a factor in the jump in orders, the sources cited DeepSeek as the reason, Reuters said.
The sources did not provide details on the size of the orders. They were not authorised to speak to media and declined to be identified.
Nvidia did not respond to queries on how much demand for the H20 it was seeing from China but said its products won “on merit in a competitive field”. The company is set to report quarterly earnings on Wednesday.
Tencent, ByteDance and Alibaba did not respond to requests for comment.
Big demand for low-cost AI
Chinese companies are ramping up orders for Nvidia’s H20 artificial intelligence chip due to booming demand for DeepSeek’s low-cost AI models, six people familiar with the matter said.
The surge in orders, which is being reported for the first time by Reuters, underlines Nvidia’s dominance of the market and could help alleviate concerns that DeepSeek might cause a slide in AI chip demand.
DeepSeek’s large language models rival Western systems in performance at a fraction of the cost as they focus on “inference” or producing conclusions. That optimises computational efficiency rather than relying solely on raw processing power.
“When DeepSeek launched, many misjudged that computing power demand might stagnate or decrease. In reality, more advanced AI models drive deeper integration into daily life, exponentially increasing inference-level compute need,” Nori Chiou, investment director at Singapore-based White Oak Capital Partners, said.
A DeepSeek-induced global rout in AI stocks in late January 24 saw Nvidia shares lose as much as a fifth of their value at one point but they have since regained most of that ground and are down just 3% for the year to date.
H20 generated $12bn in 2024
Though wider deployment of DeepSeek AI models is expected to help Chinese chipmakers such as Huawei better compete in the domestic market thanks to the models’ focus on inference, Nvidia’s H20 chip remains the industry standard in China.
Analysts estimate Nvidia shipped approximately 1 million H20 units in 2024, generating over $12 billion in revenue for the company.
The H20 is the primary chip Nvidia is legally permitted to sell in China and was launched after the latest round of US export restrictions took effect in October 2023.
Washington has banned exports of Nvidia’s most advanced chips to China since 2022, concerned that advanced technologies could be used by China to build up its military capabilities.
Numerous Chinese companies have announced plans to use DeepSeek’s models. Among them are Tencent, which has said it will beta test integrating the models into its highly popular WeChat messaging app, and automaker Great Wall, which has integrated DeepSeek’s model into its connected vehicle system.
- Reuters with additional input and editing by Jim Pollard
NOTE: This report was updated on February 25, 2025 to add comment by China’s foreign ministry.
ALSO SEE:
Asia Stocks on Edge as Trump Vows Tariffs on Chips, Autos, Pharma
Taiwan, Korea on Edge as Trump Sets Sight on Chip Funding
US-China Trade War Goes Into Gear as Beijing’s Tariffs Kick In
‘AI Breakthrough’ by China’s DeepSeek Rocks US Tech Giants
Bytedance ‘Plans $20 Billion Outlay on AI Infrastructure This Year’
Biden Restricts Access to AI Chips to US Firms And Its Allies
Biden’s Final Fling: Curbs on US-Made AI Chips, Russia Sanctions
China’s Chipmaking Skills 10-15 Years Behind West: ASML CEO
US Rules to Limit Investment in China’s Chips, Quantum and AI
China’s Bid to ‘Cheat’ a Way to Chip Prominence is Failing: Envoy
