Why the US reversed course on H20 GPU sales to China
Sell an ageing chip to maintain ecosystem lock.
Nvidia can now sell its H20 GPU to China. Why move heaven and earth to block access to advanced GPUs, only to backtrack now? Here's why.
You’ve probably seen the headlines about Nvidia being allowed to sell its H20 GPUs. Beyond the smoke and mirrors, here's the real reason.
Part of a deal
According to U.S. Commerce Secretary Howard Lutnick, the easing of the ban is part of a China deal related to rare earth metals.
This was said in an interview with CNBC yesterday - complete with transcript. The Financial Times also wrote about it.
Not so powerful anyway
It's worth noting that the H20 is a stripped-down version of the H200 series, created just for China. Its absolute processing capabilities are significantly lower.
While parts of DeepSeek R1 were trained on the H20s using innovative and breakthrough techniques to overcome various deficiencies, the H20's architecture is more suited for inference than AI training.
And since the H20 was banned, Nvidia's Blackwell GPUs have started to enter the market in volume. This makes the H20 arguably only the 4th-best chip from the company.
An entire ecosystem at stake
Nvidia had previously shared how much it stood to lose from being unable to sell its GPUs to China. But the impact goes beyond mere profits.
- Incentivise the development of Chinese AI tech.
- Increase urgency to develop local chipmaking.
- Divert billions for local AI chips.
Indeed, Huawei earlier this year unveiled its AI CloudMatrix 384, a scale-up supercomputer that successfully tackled multiple technical challenges across optics, networking and software.
Most crucially, AI talents could be forced towards other ecosystems for AI development, effectively breaking Nvidia's strong ecosystem lock.
My thoughts
In a nutshell, allowing the sales of the H20 to China isn't altruism, but part of a strategy designed to:
- Bolster the stock market.
- Keep Chinese firms locked to Nvidia.
- Slow the development of Chinese AI chips.
Here's what Howard Lutnick told CNBC:
"[You] want to keep one step ahead of what they can build so they keep buying our chips, because, remember, developers are the key to technology. You want the world’s developers to use your tech... So you want to sell the Chinese enough that their developers get addicted to the American technology stack."
As I explained previously, I think GPU bans and restrictions are ultimately a whack-a-mole game that will only slow, not stop, the use of GPUs.
What do you think?
