Nvidia is investigating whether it can increase production of its H200 AI chips after demand from China proved much higher than expected.
This has been reported by sources to Reuters. Chinese technology companies are said to have shown massive interest in the chip in recent weeks, which is one of the most powerful AI accelerators currently available on the Chinese market.
The potential increase in production follows a decision by the US government to allow Nvidia to export the H200 to China, subject to a 25 percent levy. This unexpectedly gave Chinese companies access to a chip that is significantly more powerful than the previously approved H20, a specially weakened version for China. For many Chinese parties, the H200 is currently the best-performing chip they can legally purchase.
According to insiders, Alibaba and ByteDance, among others, have contacted Nvidia to discuss large orders. According to Reuters, demand is so strong that current production levels are insufficient. Nvidia is therefore looking into whether additional capacity can be freed up at chip manufacturer TSMC. At the same time, Nvidia emphasizes that any additional deliveries to China must not affect customers in the United States and other markets.
Chinese government still needs to approve
However, delivery to China is not yet a done deal. The Chinese government has not yet officially approved the import of the H200. Sources report that urgent consultations have been held within the Chinese government to assess the impact. One concern is that the arrival of a very powerful foreign AI chip could slow down the development of the country’s own chip industry. Domestic alternatives are currently still lagging behind the performance level of the H200.
During those discussions, a proposal was reportedly made to link purchases of H200 chips to the purchase of a certain number of Chinese chips. In this way, China wants to prevent domestic producers from being completely sidelined, while still giving companies access to the computing power they need for AI applications.
For Nvidia, expanding capacity is not an easy decision. The company is busy scaling up its latest Blackwell chips and preparing for the next Rubin generation. In addition, the available advanced production capacity at TSMC is scarce and highly sought after, including by major players such as Google.