Nvidia tells cloud clients to cap China sales, FT reports

Nvidia ↘ 3.17% has told cloud computing clients that at least 51% of their services must be sold to companies outside China, the Financial Times reported on Tuesday, November 3, citing five people with knowledge of the matter. The instruction narrows one of the main remaining ways Chinese technology firms can reach advanced U.S. AI chips. Many have been renting computing power from overseas data centers instead of buying the hardware directly.malaymail.com+1

How the rule works

According to the FT, Nvidia's sales staff and regional teams passed the requirement on verbally, and the company did not issue any written notice. Two of the people said it applies to Nvidia's customers worldwide, not just data centers in Asia. It also covers only new contracts and leaves existing leases alone. Investing.com reported that Nvidia had no such restriction before.thestandard.com.hk+2

The reports do not say whether the 51% share is measured by revenue, computing capacity or number of customers. They also do not say how Nvidia defines a Chinese company. Bloomberg said the FT's sources were unnamed, and Reuters said it could not immediately verify the report.shiftdelete.net+2

Responses from Nvidia and Beijing

Nvidia did not confirm or deny the report to AFP. In a statement, the company said that "America cannot win the AI race unless America's AI infrastructure wins worldwide." It added that "longstanding US policy encourages every cloud to build on American infrastructure and to win business everywhere they can".finance.yahoo.com

Chinese foreign ministry spokeswoman Mao Ning said she was not aware of the report. She said Beijing hopes "all parties can provide a fair, transparent and non-discriminatory business environment for companies from all countries, including Chinese companies".malaymail.com

Pressure on Asian providers

The rule could be costly for Southeast Asian cloud companies with many Chinese clients. Some fear they may have to scale back data center operations if they cannot attract enough other customers. A Singapore-based provider told the FT that finding enough non-Chinese customers outside the U.S. is difficult and that strict enforcement would hurt its business.econotimes.com+1

The move adds to tighter checks on Nvidia's partners. The company has inspected data centers, reviewed contracts and interviewed end users at providers that rent out GPU capacity. In July, it cut its list of Asian customers approved to buy AI chips by more than half. The new rule also follows U.S. Commerce Department guidance issued in May, which aimed to keep advanced chips away from Chinese entities operating through third countries.shiftdelete.net+1