Nvidia has reportedly told cloud providers using its data center products that they must sell less than half of their services to Chinese companies, as part of new global restrictions.
Nvidia has reportedly told its data center customers that they must limit the amount of business they do with Chinese companies, in what is a new policy for the U.S. company. Under the move, data center operators that sell their services to Chinese companies would need to track what proportion of their overall business those customers make up. They would be limited to 49% of total business, with at least 51% coming from non-Chinese customers. The FT reports that Nvidia's sales force and regional teams have communicated the policy to customers, and that it does not appear to have been published in any official form in documentation.
Notably, the alleged policy does not apply only to data centers located in Asia. It applies to operators based anywhere in the world. It also affects only new and future contracts, not existing Nvidia hardware leasing agreements. In a statement, Nvidia said that "American chips are the foundation that American model and application makers need to compete worldwide." The statement added that current U.S. policy "encourages" cloud providers to build on American infrastructure and to accept business from "everywhere they can."
The move to restrict Chinese access to Nvidia's high-performance data center hardware comes amid ongoing tensions between the United States and China over AI capabilities. Nvidia can sell its chips only to whitelisted companies, a restriction that has fueled a thriving black market for its products. Earlier this year, it was found that even Nvidia's older servers had become so sought-after that their values had tripled.
Whether limits on Nvidia's customer base have had the desired effect is open to debate. China Telecom, the state-owned telecoms giant, was recently found to have Nvidia hardware in its data centers. The situation would not be out of place in a spy thriller, with Nvidia CEO Jason Huang reportedly the target of a plot by Chinese agents.
The reasons behind the U.S. government's efforts to limit China's access to Nvidia hardware are clear. The aim is to hinder China's ability to advance its own AI technologies, since Nvidia chips are the go-to option for AI servers and data centers around the world. However, restricting which customers cloud service providers can accept will add strain for companies already competing for the same contracts. A smaller pool of potential customers could shrink the scale of data center operations going forward.