China has banned its leading technology companies from procuring Nvidia Corporation (NASDAQ:NVDA)’s artificial intelligence (AI) chips. During Wednesday’s pre-market trading session, Nvidia stock fell nearly 1.5%.

China Halts Nvidia Chip Use, Boosts Domestic AI Tech

The Cyberspace Administration of China (CAC) has instructed major tech firms, including ByteDance and Alibaba Group Holding Ltd (NYSE:BABA), to halt their testing and orders of Nvidia’s RTX Pro 6000D, a chip specifically designed for the Chinese market, the Financial Times reported.

This directive follows earlier guidance from Chinese regulators, focusing on Nvidia’s H20, another China-only chip widely used for AI. The ban comes after Chinese regulators determined that domestic chips have achieved performance levels comparable to those of Nvidia’s models used in China.

Nvidia did not immediately respond to Benzinga’s request for comment.

Check out the current price of NVDA stock here.

China is exerting pressure on its tech companies to strengthen the country’s domestic semiconductor industry and reduce their dependence on Nvidia to compete in the global AI race, particularly against the U.S.

After the ban, companies instructed suppliers to stop chip-related work, advancing efforts for an independent semiconductor supply chain to rival the US in AI.

This ban is a part of China’s broader strategy to boost its domestic semiconductor industry and reduce its reliance on foreign technology. This move is seen as a response to the American export ban on Nvidia’s most powerful products to China, which was implemented during the tenure of former President Joe Biden.

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Nvidia’s Deepening Chinese Woes

Earlier this month, a top Chinese government adviser warned that Asian nations risk becoming dependent on U.S. GPUs, which power platforms from ChatGPT to DeepSeek. He urged the country to develop domestic chips that enable artificial intelligence.

This ban comes amid a deepening crisis for Nvidia in China. The company is facing an antitrust probe from Chinese regulators, who have alleged that Nvidia violated the country’s anti-monopoly law. This, coupled with policy changes from Washington, has created significant uncertainty for Nvidia in the Chinese market.

Meanwhile, Jack Ma has re-emerged at the center of Alibaba Group as the company intensifies its push into artificial intelligence. This move could potentially strengthen Alibaba’s position in the Chinese semiconductor industry, as the company seeks to develop its own AI chips.

Benzinga’s Edge Rankings place Nvidia in the 87th percentile for momentum and the 98th percentile for growth, reflecting its strong performance in both areas. Check the detailed report here. 

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.