China bets big on AI with $5 billion Nvidia chip order

China’s internet giants are rushing to acquire high-performance Nvidia chips vital for building generative artificial intelligence systems, making orders worth $5 billion, the Financial Times reported on Wednesday.

Baidu, TikTok-owner ByteDance, Tencent and Alibaba have made orders worth $1 billion to acquire about 100,000 A800 processors from the U.S. chipmaker to be delivered this year, the FT reported, citing multiple people familiar with the matter.

The Chinese groups had also purchased a further $4 billion worth of graphics processing units to be delivered in 2024, according to the report.

A Nvidia spokesperson would not elaborate on the report but said that “consumer internet companies and cloud providers invest billions of dollars on data center components every year, often placing orders many months in advance.”

The Biden administration last October issued a sweeping set of rules designed to freeze China’s semiconductor industry in place while the U.S. pours billions of dollars in subsidies into its chip industry.

Nvidia offers the A800 processor in China to meet export control rules after U.S. officials asked the company to stop exporting its two top computing chips to the country for AI-related work.

The FT report comes as President Biden on Wednesday signed an executive order that would narrowly prohibit certain U.S. investments in sensitive technology in China and require government notification of funding in other tech sectors.

Nvidia’s finance chief said in June that restrictions on exports of AI chips to China “would result in a permanent loss of opportunities for the U.S. industry”, though the company expected no immediate material impact. Reuters