Chinese tech giants Tencent, Alibaba, and ByteDance are ramping up orders for Nvidia’s (NASDAQ: NVDA) H20 AI chip due to soaring demand for DeepSeek’s cost-efficient AI models, sources told Reuters. This surge highlights Nvidia’s dominance in China’s AI sector, even as U.S. export restrictions limit its offerings.
The H20, specifically designed for the Chinese market, has seen a sharp increase in demand since DeepSeek’s AI models gained global recognition last month. Beyond their own AI needs, these companies offer cloud computing services, further driving demand for Nvidia’s chips. Smaller firms in healthcare and education are also investing in AI servers equipped with DeepSeek models and H20 chips.
While potential U.S. restrictions on H20 sales to China loom, industry insiders attribute the growing demand primarily to DeepSeek’s AI capabilities. The models prioritize inference efficiency, reducing reliance on raw processing power, which has fueled their adoption across industries.
A market shakeup in January saw Nvidia shares drop nearly 20% due to concerns that DeepSeek might reduce AI chip demand. However, the stock has since rebounded, down just 3% year-to-date. Analysts estimate Nvidia shipped roughly 1 million H20 units in 2024, generating over $12 billion in revenue. Despite efforts by Chinese chipmakers like Huawei to compete, Nvidia’s H20 remains the industry standard.
Companies including Tencent and Great Wall Motors have already announced plans to integrate DeepSeek’s AI models into their platforms. As AI adoption accelerates in China, Nvidia’s position in the market remains strong, reinforcing its crucial role in the country’s AI infrastructure.
