China is one of Nvidia’s largest markets, particularly for data centers, gaming and artificial intelligence applications.
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While Nvidia has been given assurances by Washington that it will be allowed to resume exports of its made-for-China H20 general processing units, the AI chips’ return may be met with increased scrutiny from Beijing.
According to the Cyberspace Administration of China, Nvidia met with Beijing officials on Thursday regarding national security concerns posed by the H20 chips, which are expected to resume shipments to China following an effective ban in April.
Nvidia was requested “to clarify and submit relevant supporting documentation regarding security risks, including potential vulnerabilities and backdoors, associated with its H20 computing chips sold to China,” according to a CNBC translation of a statement from CAC.
In a post, the regulator said that Nvidia’s AI chips have been reported to contain serious security vulnerabilities. It also noted calls from U.S. lawmakers for mandatory tracking features to be placed on advanced chip exports.
CAC added that American AI experts had already revealed that Nvidia’s computing chips pose mature “tracking and positioning” and “remote shutdown” technologies.
In May, Republican U.S. Senator Tom Cotton and a bipartisan group of eight Representatives introduced the U.S. Chip Security Act that would require semiconductor companies like Nvidia to include security mechanisms and location verification in their advanced AI chips.
Democratic Representative Bill Foster, who was one of the co-leads of the bill in the House, and independent technical experts told Reuters in May that the technology to track chips was readily available, with much of it already built into Nvidia’s chips.
Nvidia did not immediately respond to a request for comment from CNBC.
In recent weeks, many American lawmakers have also pushed back against the reported rollback of restrictions on Nvidia’s H20 chips, warning they will advance Beijing’s AI capability.
Increased scrutiny from Beijing could introduce yet another geopolitical headwind for Nvidia CEO Jensen Huang, who has been balancing between Washington’s semiconductor policies and his desire to sell to the lucrative China market.
Huang had announced the expected resumption of H20 chip sales during his latest visit to Beijing — a trip that came soon after he met with U.S. President Donald Trump.
Nvidia had taken a $4.5 billion writedown on the unsold H20 inventory in May and said sales in its last financial quarter would have been $2.5 billion higher without any export curbs.
This week, Nvidia reportedly placed orders for 300,000 H20 chipsets with contract manufacturer TSMC as it seeks to meet Chinese demand.