Chinese companies order Nvidia chips worth $5B amid fears of US curbing China's AI ambitions - report
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Chinaâs top tech companies have placed orders worth $5B for Nvidia (NASDAQ:NVDA) chips, which are important to make generative artificial intelligence, or AI, systems, the Financial Times reported citing people with knowledge of the matter.
Alibaba (NYSE:BABA), Baidu (NASDAQ:BIDU), ByteDance (BDNCE) and Tencent (OTCPK:TCEHY) (OTCPK:TCTZF) have made orders worth $1B to buy about 100K A800 processors from Nvidia to be delivered this year. The companies have also bought an additional $4B worth of the graphics processing units to be delivered in 2024, the report added.
Nvidia (NVDA) shares rose 1.7% in early morning trading, while competitors AMD (AMD) and Intel (INTC) gained 2.5% and 1.7%, respectively.
The move seems to come amid the U.S. President Joe Biden signing an executive order which will restrict some new U.S. investment in China in areas related to semiconductors and microelectronics, quantum information technologies and AI from next year. The restrictions, however, would apply to narrow subsets of the these areas.
On Wednesday, it was reported that the proposal to limit investment in China may apply only to Chinese companies which get at least half of their revenue from cutting-edge businesses such as quantum computing and AI.
Chinese companies are only able to acquire the A800s, which have slower data transfer rates than Nvidia's cutting edge A100s GPU for data centers, due to export limitations imposed by the U.S. last year in an effort to curb China's technological ambitions, the FT report added.
As the AI race heats up, Nvidia's GPUs have become popular to provide computing power for developing large language models, or LLMs.
Following the release of Microsoft (MSFT)-backed OpenAI's ChatGPT, Chinese companies including Alibaba, SenseTime (OTCPK:SNTMF) and Baidu have launched their own generative AI services. Earlier this month, Alibaba's unit introduced two open-sourced AI models, similar to Meta Platforms' (META) Llama 2. Baidu's Ernie Bot and Alibaba's Tongyi Qianwen and Tongyi Wanxiang are some of the other AI models.
Chinese companies are rushing to stockpile the A800 chips over fears that U.S. is mulling new export restrictions which could include even Nvidia's weakened chips.
ByteDance has already stockpiled at least 10K Nvidia GPUs to further its ambitions. The company had also ordered about 70K A800 chips worth ~$700M to be delivered next year, according to the report. Earlier this year, ByteDance had tested a generative AI feature for its app TikTok called TikTok Tako, which licenses OpenAI's ChatGPT.
"Consumer internet companies and cloud providers invest billions of dollars on data centre components every year, often placing orders many months in advance," said Nvidia, as per the report.
Earlier this year, most Chinese tech companies had less than a few thousand chips in stock which could be used to train the LLMs, and as demand has risen since then, so has the price of those chips, the report noted.
The price of the A800 in the hands of distributors have increased by over 50%, the report added citing a Nvidia distributor.
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