chip sanctions trigger unexpected ai boom in china

2025-04-26 general

Washington D.C., Saturday, 26 April 2025.
us sanctions intended to slow china’s ai development are having the opposite effect. nvidia faces a potential $5.5 billion revenue hit. chinese firms are rapidly innovating, with huawei’s ascend 910c chip now rivaling nvidia’s h100. this push towards self-sufficiency sees large language model training shifting to domestic infrastructures like huawei and alibaba clouds. some analysts suggest that us restrictions are primarily hurting us companies, while china’s ai development remains largely unaffected.

China’s ai advancement

President Xi Jinping emphasized that China must overcome challenges in core AI technologies, including advanced chips [3]. This push for self-reliance aligns with the broader goal of dominating the AI sector, complicated by trade tensions with the U.S. [3]. These tensions include U.S. tariffs on Chinese goods reaching 145 percent, met by China’s 125 percent duties on U.S. imports [3]. Despite acknowledging existing gaps, Xi called for strengthened basic research and an autonomous AI system [3].

huawei’s ascendance

Huawei is increasing production of its Ascend 910C AI processor as a domestic alternative [2]. Mass shipments are expected to commence within the next few weeks [2]. The Ascend 910C, consisting of two 910B chips, outperforms Nvidia’s H20 and is comparable to the H100 [2]. Huawei’s CloudMatrix 394 data center solution uses 384 Ascend 910C processors [2]. SemiAnalysis analysts note that Huawei’s scale-up solution is ahead of Nvidia and AMD’s current market offerings, though its chip technology lags by a generation [2].

market dynamics and strategic stockpiling

Chinese companies, including Alibaba, ByteDance, and Tencent, placed orders worth $12 billion to $16 billion for H20 processors in early 2025 [2]. An unidentified Chinese corporate executive noted that major tech companies stockpiled H20 chips in anticipation of potential bans, leveraging their strong performance while available [2]. This strategic stockpiling reflects a proactive approach to mitigate the impact of U.S. sanctions and maintain AI development momentum [2].

deepseek’s ai model

DeepSeek launched its R1 chatbot in January 2025, rivaling U.S. competitors at a lower cost, shaking up the AI landscape [3][5]. A House Select Committee report highlighted DeepSeek’s use of U.S. export-controlled Nvidia chips and potential data security risks [5]. The report also found that DeepSeek’s chatbot alters or suppresses responses on politically sensitive topics in 85% of cases, aligning with CCP censorship [5]. Concerns about DeepSeek’s potential use of Nvidia chips led to inquiries from lawmakers [5].

nvidia’s response and future strategies

Nvidia CEO Jensen Huang visited Beijing in April 2025, expressing a commitment to the Chinese market and U.S.-China trade cooperation [3]. However, Nvidia faces challenges due to tightened export controls, projecting a $5.5 billion revenue loss [1]. To navigate these restrictions, Nvidia may focus on non-China markets like Europe, India, and the Middle East [1]. Despite these efforts, the U.S. restrictions are incentivizing the localization of China’s tech stack [1].

Bronnen

Chip Sanctions AI Innovation