China Bans Foreign AI Chips in State-Funded Data Centers

The Chinese Government has issued new guidance requiring data centers receiving state funding to use only domestically made artificial intelligence chips. Projects that are less than 30% complete must remove any installed foreign chips or cancel purchase plans, while those further along will be reviewed individually.

The directive affects major U.S. chipmakers, including NVIDIA, Advanced Micro Devices, Inc. (AMD), and Intel Corporation. It covers Nvidia’s H20 processors, the most advanced chips permitted for sale to China under U.S. export rules, as well as higher-end models such as the B200 and H200, which are restricted but still circulate through unofficial channels.

AI data center projects in China have received more than $100 billion in state funding since 2021, meaning most facilities are likely affected. Some projects have already been suspended, including one in a northwestern province that planned to use Nvidia chips. The policy could significantly reduce foreign chipmakers’ market share in China, while strengthening domestic suppliers such as Huawei, Cambricon, MetaX, Moore Threads, and Enflame.

The move aligns with Beijing’s broader strategy to increase chip self-sufficiency amid ongoing U.S. export controls. While it may boost local production, the restriction could also widen the gap between Chinese and U.S. data center computing capabilities, as American firms continue large-scale deployments using advanced Nvidia hardware.