China imposed restrictions on foreign chips in government and strategic projects

The Chinese government has issued guidance requiring new data center projects that have received any state funds to use only domestically made artificial intelligence chips. Regulatory authorities have ordered data centers less than 30 percent complete to remove all installed foreign chips or cancel plans to purchase them, while projects in more advanced stages would be decided on a case-by-case basis. This represents one of China's most aggressive steps yet to eliminate foreign technology from its critical infrastructure and achieve AI chip self-sufficiency, particularly as it seeks to reduce dependence on Nvidia Corp and other foreign suppliers. US President Donald Trump stated following talks with Chinese President Xi Jinping that Washington would "let them deal with Nvidia, but not in terms of the most advanced" chips. Some projects have already been suspended before breaking ground as a result of the directive, including a facility in a northwestern province that had planned to deploy Nvidia chips and was being developed by a private technology company that received state funding.

AI data center projects in China have drawn more than US$100 billion in state funding since 2021, according to a Reuters review of government tenders. Nvidia's current share of the Chinese AI chip market is zero, compared with 95 percent in 2022. The latest directive carves out additional market share for domestic chipmakers, including Huawei Technologies Co, Shanghai-listed Cambricon Technologies Corp, and start-ups such as MetaX Integrated Circuits Co, Moore Threads Technology Co, and Enflame Technology Co. While products from these Chinese companies already rival some of Nvidia's offerings, they have struggled to crack the market as developers accustomed to Nvidia's reliable software ecosystem have been reluctant to adopt domestic alternatives. However, the move risks widening the US-China gap in AI computing power, particularly as leading Chinese chip manufacturers like Semiconductor Manufacturing International Corp face supply constraints due to US sanctions on semiconductor manufacturing equipment that have hit advanced chip production capacity.

Meanwhile, Google DeepMind vice president John Jumper, who won the 2024 Nobel Prize in chemistry for his work on artificial intelligence, is leaving the company to join Anthropic PBC. Jumper has been a key member of Google's AI coding development team, and his departure strains the tech giant's efforts to compete with Anthropic, OpenAI, and SpaceX in the race to build the most powerful AI models. The departure underscores Google's struggle to retain top talent and sell AI coding tools to businesses. Separately, US Secretary of Commerce Howard Lutnick has expressed concerns to Dutch chip-equipment giant ASML Holding NV's senior leaders that one of its extreme ultraviolet lithography machines might have made its way into China in violation of US-led export restrictions, with ASML denying what it calls "unfounded rumors regarding non-compliance with export controls concerning China."