DeepSeek AI Boom Spurs NVIDIA H20 Chip Sales in China

Chinese tech giants Alibaba, ByteDance, and Tencent are ramping up purchases of downgraded NVIDIA H20 chips to power generative AI models like DeepSeek-R1, defying concerns that China’s AI advancements could weaken demand for U.S. hardware, according to an exclusive report from Reuters.

Despite U.S. export restrictions, NVIDIA sold around 1 million H20 chips in 2024, generating $12 billion in revenue — a sign that demand for AI infrastructure in China remains strong.

H20 chip is NVIDIA’s primary legal product in China

The HGX H20 GPU, a scaled-down version of NVIDIA’s flagship H100, was designed to comply with U.S. export controls while maintaining access to the Chinese market. Priced between $12,000 and $15,000 per unit, the H20 has become a critical component in China’s AI race after export restrictions in 2023.

While the H20 remains legal for export, U.S. policy could shift. The Trump administration, if re-elected, may consider AI chip restrictions.

DeepSeek AI models drive surging demand

DeepSeek’s rise has accelerated China’s demand for AI computing power with Alibaba, ByteDance, and Tencent investing heavily in H20-powered AI infrastructure as they provide cloud services hosting DeepSeek-R1.

AI servers running DeepSeek models and Nvidia H20 chips are also in demand from healthcare and education companies, according to Reuters.

Despite strong NVIDIA sales, China’s AI industry is actively developing domestic hardware alternatives to reduce reliance on U.S. technology. DeepSeek’s “inference” techniques allows it to run higher-performance AI generative tasks with lower costs and power consumption.

Meanwhile, in the U.S., some AI firms are exploring ways to reduce reliance on NVIDIA’s industry-leading chips as competition in the semiconductor industry grows.

DeepSeek’s February debut sent shockwaves through the global AI market, prompting large AI companies like OpenAI and Baidu to release or announce free versions of their most advanced software, possibly in response to DeepSeek-R1 free “reasoning” AI model.
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