China’s AI giants fight to balance GPU performance, price and policy headaches

China’s artificial intelligence sector is battling with a GPU dilemma as firms balance performance, price and policy risk in a tightening global technology landscape.

Although the US loosened its grip and gave Nvidia approval to sell its H200 GPUs into China, shipments delay at customs, pushing AI developers to choose between grey market GPUs at a premium or slower domestic chips.

Firms are navigating China’s GPU and AI supply squeeze

According to reports from some Chinese AI companies, Nvidia’s H200 processing units have become hard to obtain through any means other than illicit channels, although they obtained regulatory approval to acquire this equipment. The uncertainty surrounding this situation is impacting how many companies are able to effectively create training plans.

SCMP cited a senior official with a Beijing data center who said that “it is impossible to create a serious training plan until we have the infrastructure in place.”

Pricing for H200s has skyrocketed past the world averages. According to industry consultants, “Some businesses will go to any length necessary to keep up competitive disadvantage.” Other firms are working on moving their workloads from H200s to less-powerful models.

According to the Cryptopolitan, Nvidia’s suppliers have halted production of the company’s H200 AI accelerator after China moved to block shipments of advanced chips, dealing another blow to the US chipmaker’s access to one of its largest markets.

Recently, the suppliers had been working nonstop in anticipation of more than a million orders from China, aiming to meet March delivery targets. This week, however, Chinese customs officials informed agents that shipments of the H200 would not be allowed into the country.

China drafted a new regulatory bill that will control how many advanced AI chips local companies can buy from foreign suppliers, specifically Nvidia, according to Nikkei Asia. This is part of Xi Jinping’s mission to support state-backed chipmakers over American ones since Trump started a tech and trade war.

Demand for Nvidia inside China is still high, especially from large platforms that rely on heavy computing power to run AI models at scale. Chinese companies have placed orders for more than two million H200 chips, each priced at roughly $27,000.

Huawei and several other local chip fabricators have stepped in, producing GPUs to support various AI applications, rather than developing new GPUs for frontier model training. One AI engineer based in Shanghai believes the domestic chip sector continues a rapid improvement regime.

“At present, they can’t compare with Nvidia, but they are becoming increasingly viable in the use of inference and applied models,” he stated.

As a result of these trade-offs, some of the high-end projects have been delayed, while other projects focused on improving computational efficiency have accelerated so much that many companies are completely revising their models so that they consume fewer CPU cores.

This is likely to reshape the direction of China’s AI evolution, according to analysts.

Using infrastructure and energy to strengthen AI ambitions

Chinese Vice Premier HE Lifeng Zhang emphasized the importance of China’s infrastructure-first strategy during the World Economic Forum and how it gives them a competitive edge.

According to Zhang, China’s infrastructure-first strategy provides a structural advantage to China, since low-cost, reliable electricity will have an enormous impact on what can be accomplished with AI.

Zhang stated that the establishment of large data centers could increase China’s total number of data centers from around 120 million to as many as 300 million by 2030.

A policy researcher estimated that electricity consumption from all of China’s data centers would more than double by 2030, with electricity supply expected to keep pace with this increased demand.

According to one energy analyst who specializes in the region, electricity is just as important to AI development as semiconductors are. “Electricity is the quiet benefactor of AI,” the energy analyst stated.

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