Chinese Tech Giants Keep Buying Nvidia’s H20 Chips Despite Beijing’s Warnings

Chinese demand for Nvidia’s H20 chips remains strong despite Beijing’s warnings over “security” risks, industry sources told Nikkei Asia. The U.S. chipmaker, which agreed to hand 15% of China sales revenue to Washington in exchange for export approval, is now eyeing a rebound in the world’s second-largest economy.

Beijing recently summoned Alibaba, ByteDance, Tencent, and Baidu, urging them to rely more on domestic suppliers like Huawei, Biren, and Cambricon. State media later echoed government concerns, alleging H20 chips carry backdoor risks — a claim Nvidia denies. Bloomberg also reported officials warning against using H20 in government projects.

Executives at major Chinese firms, however, say the guidance is only “advice,” not a ban. One told Nikkei that their projects are not “critical infrastructure” and will continue to use Nvidia chips. Another noted that while Huawei’s Ascend is praised as “superior,” it suffers from efficiency problems, higher-than-expected defects, and capacity constraints.

Tencent President Martin Lau recently said the company has enough GPUs for AI training and upgrades, but staff admitted concerns over shortages since Tencent also rents GPUs externally.

Price also works in Nvidia’s favor. “H20 is actually cheaper to use than some Chinese alternatives,” a Beijing venture capitalist said, citing both purchase cost and energy efficiency. Nvidia’s CUDA software platform makes it harder to replace, even when Chinese rivals approach its hardware, according to Nikkei Asia.

A supplier executive said demand for H20 servers has not shifted since Beijing’s warning: “For the Chinese CSP [cloud service providers], they still hope to use higher-efficiency chips… they will continue to buy chips from Nvidia, but they will also increase their use of homegrown chips.”

Margins on H20 are thinner, and production strains TSMC’s already tight CoWoS packaging capacity, but “being able to continue selling H20s into China is a way to show its goodwill to the Chinese government and hold on to its market share,” the executive added.

Looking ahead, Nvidia is preparing a downgraded Blackwell chip for China, set to use GDDR7 memory instead of more advanced HBM, to comply with U.S. rules. Its performance is still unknown, and it’s unclear if Nvidia must again share revenue with Washington. Some hope the Trump administration will relax controls further.

“The H20 shows there are always deals to be made with the Trump administration,” said the Beijing venture capitalist, suggesting even full-capacity Blackwell sales could be negotiated. But others doubt it. “I don’t think there’s the sense that they [Nvidia] necessarily need to” sell unrestricted Blackwell chips in China, said Bob O’Donnell of Technalysis Research.

Nikkei Asia writes that for now, Nvidia’s technology advantage keeps it indispensable. “Every company or country has recognized the importance of developing their own AI capabilities… they’re going to buy Nvidia chips, whether they necessarily want to or not, because it’s the only option they have,” O’Donnell said.

“There’s definitely politics going on, but I don’t think it’s going to be an issue [for Nvidia to recover in China],” added Dan Ives of Wedbush Securities.

Nvidia reiterated its chips are secure and warned that blocking H20 sales would harm U.S. interests.