Even though China and the United States may have extended their tariff truce, it looks like there still doesn’t seem to be any love lost between the two countries.
China is pressuring major tech companies like Alibaba and ByteDance to reconsider their orders for Nvidia’s H20 AI chips even as Chinese regulators have asked tech firms to explain why they are purchasing Nvidia’s chips – which President Donald Trump called “obsolete” – instead of using domestic alternatives, suggesting that they want the Chinese tech companies to downsize their orders of H20 chips.
According to a report by Financial Times, this scrutiny has led some of the main buyers of the H20 to cut their orders. The development comes as various Chinese companies have been told to avoid using these AI chips, particularly for government-related projects.
READ: Trump might greenlight Nvidia to resume operations with China (August 12, 2025)
Citing three people familiar with the situation, the report said that the Ministry of Industry and Information Technology (MIIT) is among Chinese regulators who have asked tech firms to explain why they are purchasing Nvidia’s chips instead of using domestic alternatives.
“It’s not banned but has kind of become a politically incorrect thing to do,” a Chinese data center operator was quoted as saying.
A report from Bloomberg claimed that Chinese authorities had sent notices to companies discouraging the use of H20 chips, especially for government or security-related projects.
In a statement, Trump described the H20 chips as “obsolete,” claiming that China “already had it.” He added, “So I said, ‘Listen, I want 20% if I’m going to approve this for you,’ for the country.”
Nvidia developed the H20 chip as a slightly downgraded AI processor designed specifically for the Chinese market to comply with U.S. export restrictions. However, in April, the U.S. government imposed an export ban on the H20 chips, citing national security concerns. This ban forced Nvidia to halt shipments to China, leading to an estimated $5.5 billion revenue loss and significant inventory write-offs.
In response, Nvidia developed a further downgraded version of the H20 chip to meet export control requirements and attempted to lobby for license approvals. By mid-July 2025, the U.S. government reversed course, granting export licenses for the original H20 chips, allowing Nvidia to resume sales to China. This shift came after high-level lobbying efforts involving Nvidia’s CEO Jensen Huang and President Trump. Notably, Nvidia and AMD agreed to a unique revenue-sharing arrangement, pledging to remit 15% of their H20 and AMD MI308 chip sales in China back to the U.S. Treasury.
Despite the resumed sales, Chinese regulators have shown skepticism toward the H20 chips, cautioning state-owned companies against their use over fears of security vulnerabilities and foreign dependence. Nvidia has denied claims of “kill switches” or backdoors in the chips.
Meanwhile, China is accelerating investments in domestic AI chip development, with firms like Huawei advancing alternatives such as the Ascend 920 chip, which promises comparable performance to the Nvidia H20.