Exclusive-Chinese firms still want Nvidia chips despite government pressure not to buy, sources say

(Reuters) -Alibaba, ByteDance and other Chinese tech firms remain keen on Nvidia's artificial intelligence chips despite regulators in Beijing strongly discouraging them from such purchases, four people with knowledge of procurement discussions said.

They want reassurance that their orders of Nvidia's H20 model, which the U.S. firm in July regained permission to sell in China, are being processed, and are closely monitoring Nvidia's plans for a more powerful chip, tentatively named the B30A and which is based on its Blackwell architecture, two of the people said.

The B30A - if approved for sale by Washington - is likely to cost about double the H20, which currently sells for between $10,000 and $12,000, those two people said.

Chinese tech firms perceive the potential B30A pricing, reported by Reuters for the first time, as a good deal, they added. One said the B30A promises to be up to six times more powerful than the H20.

Both chips are downgraded versions of models sold outside China, developed specifically to comply with U.S. export restrictions.

All sources for this article were not authorised to speak to media and declined to be identified.

The extent to which China, which generated 13% of Nvidia's revenue in the past financial year, can have access to cutting-edge AI chips is one of the biggest flashpoints in the U.S.-Sino war for tech supremacy.

On one hand, the U.S. has retreated from its previous position of more severe restrictions on Nvidia sales of advanced chips to China. Nvidia and other critics of the controls say it is better if Chinese firms continue to use its chips - which work with Nvidia's software tools - so that developers do not completely switch over to offerings from rivals like Huawei.

U.S. President Donald Trump has also struck a deal with Nvidia for it to give the U.S. government 15% of its H20 revenue.

At the same time, China is keen for its tech industry to wean itself off U.S. chips. Chinese authorities have summoned companies, including Tencent and ByteDance, over their purchases of the H20, asking them to explain their reasons and expressing concerns over information risks, sources said last month.

They have, however, not been ordered to cease purchases of Nvidia products.

LIMITED DOMESTIC CHIP SUPPLY

Despite that pressure, demand for Nvidia chips remains strong in China due to constrained supplies of products from domestic rivals such as Huawei and Cambricon, the four sources said.

Another three sources who are involved in engineering operations at Chinese tech firms also said Nvidia's chips perform better than domestic products.

Alibaba, ByteDance and Tencent did not reply to Reuters requests for comment. Huawei and Cambricon also did not respond to Reuters queries.

Asked about its position versus rivals in China, Nvidia said in a statement that the "competition has undeniably arrived." It declined further comment.

Lack of clarity about Nvidia's prospects in China led the U.S. firm in late August to issue a tepid quarterly sales forecast that excluded potential revenue from the world's second-biggest economy. The company, the most valuable in the world, has seen its stock lose 6% since then.

During its earnings call, Nvidia executives said the company had received some export licenses for H20 but had yet to commence shipping because it was sorting out some issues related to the deal to give the U.S. government a portion of its China sales.

Nvidia CEO Jensen Huang has also assured Chinese customers not to worry about the H20's availability and has told suppliers that demand remains strong, two of the sources said.

Reuters reported in July that Nvidia has an inventory of 600,000-700,000 H20 chips and had asked TSMC to produce more. Sources have also said Nvidia is hoping to deliver samples of the B30A to Chinese clients for testing as early as September.

Huang estimates that the China market could be worth $50 billion to Nvidia if it were able to offer competitive products.

(Reporting by Fanny Potkin, Liam Mo and Brenda Goh; Editing by Miyoung Kim and Edwina Gibbs)