Nvidia is instructing cloud providers to reduce their dependence on Chinese customers. This requirement significantly limits China’s ability to compete with U.S. companies.
Cloud providers using Nvidia’s AI chips must now sell at least 51 percent of their services to non-Chinese customers, the Financial Times reports. This makes it more difficult for Chinese companies to access advanced AI computing power through foreign data centers.
According to five insiders, Nvidia has communicated the new requirement to its cloud partners in recent months. Previously, the chipmaker did not impose any requirements regarding the origin of providers’ customers. The sources said Nvidia conveyed the instructions verbally through its sales and regional teams, rather than in written documents.
The new requirement applies to all of Nvidia’s customers worldwide, not just data centers in Asia, according to two of the sources. However, the condition applies only to future contracts, not existing lease agreements.
Alternative route under pressure
Many Chinese companies rely on lease agreements with data center operators for advanced AI tasks, including model training. While Nvidia’s most advanced chips cannot be shipped directly to China, Chinese companies can still access this technology through foreign cloud services.
Cloud providers are struggling to meet the new requirements because “it is difficult to find enough non-Chinese customers outside the U.S.,” according to a Singapore-based group quoted in the Financial Times.
Earlier this year, Nvidia reduced the number of Asian companies authorized to purchase its advanced chips. The company operates with a list of approved customers, who must meet strict conditions.
The new measure also affects data center operators. In Southeast Asia in particular, Chinese technology companies are major buyers of AI capacity. Data centers must now seek out non-Chinese customers to comply with Nvidia’s requirements.
Meanwhile, prices for advanced Nvidia hardware in China are skyrocketing. A rack of B300 chips, which costs about $600,000 on the international market, was recently sold in China for the equivalent of $2.8 million, according to an insider. The exceptionally high price illustrates just how scarce the latest AI hardware has become there.