Chinese Buyers Turn to Underground Market for Nvidia AI Chips
In the aftermath of U.S. sanctions, Chinese buyers are seeking out top-end Nvidia AI chips through alternative channels. The SEG Plaza skyscraper in Shenzhen’s Huaqiangbei electronics area has become a go-to spot for purchasers, with discreet inquiries leading to access to these sought-after chips. While there are no legal restrictions on buying or selling high-end U.S. chips in China, export controls have created an underground market as vendors aim to avoid scrutiny from both U.S. and Chinese authorities. However, the increased demand for high-end chips, particularly Nvidia’s microprocessors, has driven up prices.
The Impact of U.S. Export Restrictions
In September, President Joe Biden’s administration imposed restrictions on Nvidia, prohibiting the export of its two most advanced chips, the A100 and the H100, to mainland China and Hong Kong. These measures were part of broader efforts to hinder AI and supercomputing development in China amidst growing political and trade tensions. The subsequent implementation of semiconductor-related export controls has further complicated the market.
Surging Demand for High-End Chips
The popularity of OpenAI’s ChatGPT has triggered a global AI boom. Consequently, the demand for high-end chips has skyrocketed, with Nvidia’s microprocessors being highly regarded for their machine-learning capabilities. Buyers such as app developers, startups, researchers, and gamers are actively seeking out these chips to meet their AI demands.
Procuring Nvidia AI Chips in China
Despite export restrictions, Chinese vendors have found ways to acquire small numbers of Nvidia A100 and H100 chips. The chips are typically obtained through two primary methods. Some vendors secure excess stock that becomes available after Nvidia ships large quantities to U.S. companies, while others import the chips using locally incorporated companies based in places like India, Taiwan, and Singapore. However, due to these limitations, the quantities procured are insufficient to build sophisticated AI models from scratch.
A model similar to OpenAI’s GPT, for example, would require over 30,000 Nvidia A100 cards. Nonetheless, a few chips can still be used to run complex machine-learning tasks and enhance existing AI models.
The Challenges of Obtaining Nvidia H100 Chips
While the availability of A100 chips is more prevalent, Nvidia H100 chips are harder to come by. These advanced chips, which entered the market in March, are currently scarce. Only one of the ten vendors interviewed by Reuters claimed to be able to procure H100s.
The Chinese Market for Nvidia AI Chips
Chinese buyers, including large tech firms like Tencent Holdings and Alibaba, have turned to alternative options provided by Nvidia. The company has developed China-tailored variants, namely the A800 and H800, which are purchased in significant quantities by these deep-pocketed firms. These substitutes have been introduced to mitigate the potential $400 million in lost sales during Nvidia’s third quarter if Chinese firms choose not to buy alternative products.
Online Platforms for Buying Nvidia AI Chips
The Huaqiangbei electronics area in Shenzhen remains the primary location for purchasing Nvidia A100 chips, with approximately 40 sellers listed on electronics procurement websites. Moreover, Alibaba’s Taobao, Xiaohongshu (similar to Instagram), and Douyin (the Chinese version of TikTok) also feature listings for A100 chips. However, caution is advised as fraud is becoming increasingly prevalent, with refurbished chips being passed off as genuine A100s. Unfortunately, acquiring H100 chips is more challenging due to their limited availability.
The Future Landscape of Chinese AI Startups
The premiums commanded by Chinese vendors for A100 and H100 chips may decline in the future. As many Chinese AI startups gradually withdraw from the market, the demand for high-end chips is expected to decrease. Currently, the U.S. is not significantly concerned about small transactions of these chips. However, if China continues to catch up in terms of AI capabilities, there may be stricter enforcement measures in the future.
Editor’s Notes
In the midst of intensifying political and trade tensions, Chinese buyers are turning to alternative channels to acquire top-end Nvidia AI chips. Despite U.S. export restrictions, the demand for these chips remains high, particularly for Nvidia’s microprocessors, known for their exceptional machine-learning capabilities. The underground market in China offers a way for buyers to obtain these chips, albeit at a higher cost. However, the future of the Chinese AI market remains uncertain, with the possibility of declining demand and potential regulatory changes. As the AI industry continues to evolve, it is crucial to stay informed about the latest developments. For the most up-to-date news and insights, visit GPT News Room.
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