Commerce Secretary Lutnick says China is only getting Nvidia’s ‘4th best’ AI chip

On Tuesday, Commerce Secretary Howard Lutnick discussed the recent decision regarding Nvidia's AI chip sales to China, emphasizing that the U.S. firm will not be providing its top-tier technology to the Chinese market. In an interview with CNBC's Brian Sullivan, Lutnick pointed out that Nvidia intends to sell China its 'fourth best' chip, which is notably slower than the leading models available in the U.S. Lutnick stated, "We don't sell them our best stuff, not our second best stuff, not even our third best." The announcement comes after Nvidia revealed it would soon resume sales of its H20 chip to China, following the Trump administration's indication that it would issue necessary export licenses. This move was reportedly connected to a deal involving rare-earth magnets. According to Lutnick, it is strategically beneficial for the U.S. to have Chinese firms utilizing American technology to ensure their dependency on the U.S. tech ecosystem. He remarked, "We want to keep having the Chinese use the American technology stack, because they still rely upon it." Nvidia's CEO Jensen Huang has also advocated for continued chip sales to China, arguing that it would deter Chinese companies from developing their own infrastructure. In a recent statement, Huang asserted that the Chinese military would not be utilizing Nvidia chips and acknowledged Huawei as a legitimate competitor in the tech space. Lutnick explained the rationale behind the U.S. strategy, stating, "You want to keep one step ahead of what they can build, so they keep buying our chips." This reversal in policy represents a significant victory for Nvidia, which had previously faced restrictions that Lutnick claimed effectively closed the China market. Nvidia had projected potential sales of $8 billion in H20 chips for the current quarter before the halt. The policy shift occurred after President Donald Trump met with Huang in Washington last week, with Lutnick commenting on the approach: "You want to sell the Chinese enough that their developers get addicted to the American technology stack." The H20 chip, launched in 2022 in response to new export controls, is a modified version of Nvidia's Hopper-generation chips. Although it was designed with specific limitations to facilitate its sale to China, such as fewer GPU cores and reduced bandwidth, its performance has still found favor among certain Chinese companies. Nvidia continues to innovate, releasing new AI chips annually, with the latest offerings being the Blackwell chips. These are becoming increasingly available through cloud services and are expected to improve rapidly, keeping the competition alive in the sector. Looking ahead, Nvidia plans to unveil its next generation of chips, dubbed "Vera Rubin," in 2027.