Chinese tech companies are rapidly increasing their orders for Nvidia’s H20 artificial intelligence chip, driven by the growing demand for DeepSeek’s cost-effective AI models. Sources familiar with the matter indicate that Alibaba, ByteDance, and Tencent, among others, have notably increased their orders for the H20 chip, which is specifically designed for the Chinese market due to U.S. export controls. The surge in demand signals Nvidia’s continued dominance in the AI chip market.
Nvidia’s logo is shown in this file photo.
Beyond the tech giants’ internal requirements for advanced AI chips, they also provide cloud computing services, which allow other businesses to access and utilize AI tools. In addition, smaller firms in areas like healthcare and education have begun acquiring AI servers equipped with DeepSeek models and Nvidia H20 chips, according to a source at a major Chinese server manufacturer. Previously, this type of AI computing infrastructure was primarily purchased by financially robust firms in the financial and telecom sectors.
The increased orders come amid reports that the U.S. government is considering additional restrictions on the sale of the H20 chip to China. While this potential for further controls might be a factor, the primary driver for the increased demand appears to be the popularity of DeepSeek’s AI models.
DeepSeek’s large language models offer performance comparable to Western systems but at a reduced cost, focusing on “inference” to optimize computational efficiency. Nori Chiou, investment director at White Oak Capital Partners in Singapore, noted that the launch of DeepSeek initially led some to underestimate the ongoing need for computing power. “In reality, more advanced AI models drive deeper integration into daily life, exponentially increasing inference-level compute needs,” Chiou stated.
Despite the anticipated broader adoption of DeepSeek AI models, which are expected to assist Chinese chipmakers like Huawei to better compete domestically through inference, Nvidia’s H20 chip retains its position as the industry standard in China. Analysts estimate that Nvidia shipped roughly 1 million H20 units in 2024, generating over $12 billion in revenue. The H20 is the primary chip Nvidia is legally authorized to sell in China, following the implementation of the latest U.S. export limitations in October 2023. These restrictions have prohibited exports of Nvidia’s most advanced chips to China since 2022, driven by concerns that these technologies could be used to strengthen China’s military capabilities. Numerous Chinese companies have announced plans to incorporate DeepSeek’s models including plans by Tencent to beta test the integration of the models into its WeChat messaging app, and automaker Great Wall to integrate DeepSeek’s model into its connected vehicle system.
