China tells Alibaba, ByteDance to justify purchases of Nvidia AI chips

Beijing has issued a directive to major tech firms, including Alibaba and ByteDance, requiring them to provide justification for their acquisitions of Nvidia's H20 artificial intelligence chips. This move adds complexity to the operations of the US chipmaker in China, particularly following an export agreement established during the Trump administration. Regulators from the Ministry of Industry and Information Technology (MIIT) are seeking explanations from these companies regarding their preference for Nvidia’s H20 chips over domestic alternatives. Sources familiar with the matter indicate that some of these tech companies, previously significant purchasers of Nvidia’s H20 chips before the restrictions were implemented, are now reconsidering their order sizes in light of regulatory inquiries. One data center operator remarked, "It’s not banned but has kind of become a politically incorrect thing to do," when discussing the procurement of Nvidia’s chips. Both Alibaba and ByteDance, along with MIIT, have not provided immediate responses to requests for comments. The situation reflects a broader trend of Chinese regulators expressing discontent with the use of Nvidia's chips for government or security-related projects. Reports have indicated that Chinese authorities have circulated notices to various companies, advising against using the H20 chips, especially in contexts tied to government work.