China's three largest technology groups have accelerated orders for NVIDIA chips specially formulated for China after the success of DeepSeek, amid speculation that the Trump administration is eager to strengthen export restrictions.
Tencent, Alibaba and beast NVIDIA's H20 chip “significantly increased” orders – Comply with the third round of export controls in the United States The Biden administration imposed two sources told Reuters since Chinese AI startups caught the attention last month.
Today, Tokyo Electronics' shares fell by nearly 5%, and Dutch chip manufacturer ASMLStocks fell 3% after U.S. officials discussed further export restrictions with their peers in Japan and the Netherlands.
See also: All eyes on NVIDIA chips require doubts about AI Outlay
In addition to the internal demand for advanced AI chips, the three Chinese tech giants also offer cloud computing services, which other companies can access and use AI tools.
Small companies such as healthcare and education have also purchased AI servers equipped with DeepSeek models and NVIDIA H20 chips, according to sources in one of China’s largest server manufacturers. Sources added that previously only well-equipped financial and telecom companies purchased servers through AI computing systems.
The administration of U.S. President Donald Trump is considering imposing restrictions on selling H20 chips to China. Reuters said while the threat of further control could be a factor in order rise, sources viewed DeepSeek as a cause.
The source does not provide detailed information about order size. They have no right to talk to the media and refuse to be named.
NVIDIA did not answer questions about China's demand for the H20, but its products “winned their achievements in competitive fields.” The company is scheduled to report quarterly earnings on Wednesday.
Tencent, Bytedance and Alibaba did not respond to requests for comment.
There is a great demand for low-cost AI
Chinese companies are accelerating orders for NVIDIA's H20 AI chips due to the booming demand for DeepSeek's low-cost AI model.
Reuters' first reported orders boosted Nvidia's market dominance and could help alleviate concerns that DeepSeek could lead to a decline in demand for AI chips.
DeepSeek's large language model competes with the performance of Western systems, which is a small part of the cost of their focus on “inferences” or drawing conclusions. This optimizes computing efficiency rather than relying solely on raw processing power.
“When DeepSeek was launched, many people mistakenly thought that the demand for computing power could stagnate or decrease. In fact, more advanced AI models integrate deeper levels into daily life, multiplying the computing demand at the level of reasoning.
In late January 24, I saw the global collapse of AI stocks NVIDIA shares lose as much as one-fifth of their value Once, but they have since recovered most of the ground, down just 3% so far.
H20 generates $12 billion in 2024
Although the broader DeepSeek AI model is expected to help Chinese chip manufacturers such as Huawei compete better in the domestic market in the domestic market, NVIDIA's H20 chip remains the Chinese industry standard due to the model's emphasis on inference.
Analysts estimate that NVIDIA shipped about 1 million h20 units in 2024, bringing more than $12 billion in revenue to the company.
The H20 is the main chip NVIDIA that is legally allowed to be sold in China and has introduced the latest round of export restrictions in the United States after it came into effect in October 2023.
Since 2022, Washington has banned NVIDIA's most advanced bargaining chip exports, fearing China can use advanced technology to build its military capabilities.
Many Chinese companies have announced plans to use the DeepSeek model. These include Tencent, which represents the integration of beta tests into its popular WeChat messaging application, and the Automaker Great Wall that integrates DeepSeek's models into its connected vehicle systems.
- Jim Pollard's Extra Input and Editing by Reuters
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Bytedance's plan to have an AI infrastructure plan of $20 billion this year.
Biden restricts access to AI chips for U.S. companies and their allies
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