Nvidia is navigating an increasingly tenuous relationship between the U.S. and China, as the company seeks to sell its artificial intelligence (AI) chips to both countries while they engage in a high-stakes race to dominate the technology. <\/p>\n
The chipmaker, whose graphics processing units (GPUs) are considered the backbone of the AI boom, has seen a meteoric rise over the past few years, becoming the most valuable company in the world and the first to cross the $4 trillion threshold. <\/p>\n
However, as the U.S. and China compete for control, its chips have become a key target, creating a complex balancing act for the firm.<\/p>\n
\u201cThey\u2019re doing a spectacular job of walking that tightrope right now,\u201d said Stacy Rasgon, a senior analyst at Bernstein Research. <\/p>\n
\u201cI hope they can stay up on the rope,\u201d he added, praising CEO Jensen Huang for “doing a really good job of balancing what are some fairly opposing concerns from both sides. He\u2019s been doing a good job of walking that line.\u201d\u00a0<\/p>\n
Nvidia\u2019s chips have become highly sought after, as companies and countries alike race to develop AI. This has also made the chips a key chokepoint, as the U.S. seeks to limit China\u2019s abilities to develop the technology. <\/p>\n
\u201cThe entire chip industry has been having to learn how to reengage with Washington after a couple of decades in which the products they sold weren\u2019t seen as particularly politically sensitive. Over the past decade, that\u2019s changed dramatically,\u201d said Chris Miller, an international history professor at Tufts University. <\/p>\n
While Nvidia isn\u2019t the only chipmaker facing restrictions, it sits in a unique position as the dominant market player. <\/p>\n
\u201cNvidia\u2019s the one that\u2019s supplying the bulk of the merchant AI infrastructure that everything\u2019s running on. Clearly, it\u2019s imperative everywhere and probably doubly so in China,\u201d Rasgon said. \u201cTo the extent that China\u2019s been building out their AI infrastructure, largely they\u2019ve been building it out or desiring to build it out on Nvidia.\u201d <\/p>\n
The Biden administration initially limited some advanced chip sales to China in October 2022, prompting Nvidia to develop separate chips with slower processing speeds for sale on the Chinese market. <\/p>\n
However, the A800 and H800, alternatives to its A100 and H100 chips, were soon targeted in another round of export controls in October 2023. In response, Nvidia developed a new option for China, the H20 chip. <\/p>\n
The Trump administration initially cracked down on H20 sales to China in April, as tensions spiked between Washington and Beijing over the president\u2019s expansive tariff regime. <\/p>\n
However, shortly after a visit by Huang to the White House in July, the chipmaker said it had received assurances from the U.S. government that its H20 licenses would be approved.\u00a0<\/p>\n
Commerce Secretary Howard Lutnick said the decision was part of a rare earth deal with Beijing, arguing China is only receiving the company’s \u201cfourth best\u201d chip. The controversial move has faced pushback from both Democrats and Republicans, who contend the H20 can still boost China\u2019s AI capabilities. <\/p>\n
The decision represented a key win for Huang, who also received a shoutout from Trump just days later as the president unveiled his AI Action Plan. Trump reminisced on how he had at one point considered breaking up Nvidia.\u00a0<\/p>\n
\u201cI found out it’s not easy in that business. I said, \u2018Suppose, we put the greatest minds together. They work hand in hand for a couple of years.\u2019 He said, \u2018No, it would take at least 10 years to catch [Huang] if he ran Nvidia totally incompetently from now on,\u2019\u201d Trump said. <\/p>\n
Nvidia\u2019s unique position in the GPU market and the broader AI race gives the company a \u201cpowerful voice\u201d in Washington, Miller noted.\u00a0<\/p>\n
\u201cSo long as it\u2019s an absolutely central player in AI technology that it\u2019s been over the past couple of years, I think it\u2019s not surprising that its voice is also heeded and taken seriously by governments as well,\u201d he said. <\/p>\n
\u201cIt\u2019s also not surprising that governments, both the United States and China and others, are trying to shape the market for Nvidia chips and other AI accelerators, given how central they seem to be both for the future of technology but also for prosperity and political power,\u201d he added. <\/p>\n
Huang has made three trips to China this year to simultaneously manage relations with Beijing amid the shifting export controls in the U.S. <\/p>\n
He has largely been able to keep the peace so far, albeit with some hiccups. China\u2019s Cyberspace Administration reportedly summoned Nvidia last week to explain \u201cbackdoor security risks\u201d with its H20 chips. <\/p>\n
The chipmaker responded by releasing a blog post Tuesday, saying its chips \u201cdo not and should not have kill switches and backdoors.\u201d Kill switches are built-in mechanisms that would allow companies to remotely deactivate chips. <\/p>\n
\u201cEmbedding backdoors and kill switches into chips would be a gift to hackers and hostile actors,\u201d wrote David Reber Jr., Nvidia\u2019s chief security officer. \u201cIt would undermine global digital infrastructure and fracture trust in U.S. technology. Established law wisely requires companies to fix vulnerabilities \u2014 not create them.\u201d\u00a0<\/p>\n
The concerns about backdoors come as some American lawmakers have pushed to add location tracking to chips in order to prevent them from ending up in the hands of foreign adversaries.<\/p>\n
Even with export controls, there has been widespread concern about chip smuggling. The Justice Department on Tuesday accused two Chinese nationals of illegally shipping tens of millions of dollars’ worth of chips, including Nvidia H100s, to China. <\/p>\n
In a letter to lawmakers Thursday, Americans for Responsible Innovation, an AI policy group, called for an investigation into the \u201clarge-scale smuggling\u201d of advanced AI chips into China and whether Nvidia took \u201csufficient measures\u201d to prevent or report it. <\/p>\n
“Trying to cobble together datacenters from smuggled products is a nonstarter, both technically and economically,” an Nvidia spokesperson said in a statement. “Datacenters are massive and complex systems, making smuggling extremely difficult and risky, and we do not provide any support or repairs for restricted products.”<\/p>\n
“Rather than risk using smuggled products, the market will turn to widely available competitors such as Huawei, undercutting U.S. leadership in China and worldwide,” the spokesperson said.<\/p>\n
Despite these concerns, Nvidia remains in a fairly strong position with both the U.S. and China. Its situation stands in sharp contrast to that of Intel, which has come under fire in recent days over CEO Lip-Bu Tan\u2019s reported ties to China. <\/p>\n
Sen. Tom Cotton (R-Ark.) pressed Intel earlier this week over Tan\u2019s Chinese investments and his previous role as CEO of Cadence Design Systems, which recently pleaded guilty to violating export controls by selling chip design technology to a Chinese military university. On Thursday, Trump called for Tan to resign, suggesting he is \u201chighly conflicted.\u201d <\/p>\n
\u201cIt does not appear that Lip-Bu has cultivated that personal relationship with Trump, and maybe that\u2019s biting him now,\u201d Rasgon noted. <\/p>\n
However, there are still factors that could derail Nvidia\u2019s careful balancing act. China hawks within the administration could push back on the less restrictive approach toward AI, while Beijing will likely continue to develop its own technology. <\/p>\n
\u201cEven if the Chinese can use Nvidia chips, they\u2019re probably going to still be putting more effort into local alternatives,\u201d Rasgon added. \u201cThey have no choice, right? Because we\u2019ve shown we have the ability to cut them off at the knees when we want to.\u201d\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
Nvidia is navigating an increasingly tenuous relationship between the U.S. and China, as the company seeks to sell its artificial intelligence (AI) chips to both countries while they engage in<\/p>\n