In a strategic response to the intensifying tech war between Washington and Beijing, several non-tech Chinese firms are rushing to acquire Nvidia graphics processing units (GPUs) for artificial intelligence (AI) development. Among them is Shenzhen-listed landscape designer L&A Design, signaling a trend that highlights the broader impact of geopolitical tensions on the global technology landscape.

L&A Design’s Strategic Move:

L&A Design recently disclosed a substantial investment, amounting to 435 million yuan (US$60.5 million), to acquire up to 128 units of Nvidia servers with high-performance GPUs through a subsidiary. The move aims to bolster the company’s AI capabilities and navigate the complexities arising from the US-China tech conflict. The purchase, facilitated by Shenzhen Runxin Supply Chain, is set to be completed in two phases, with 64 servers expected by 2023, and the remaining by the end of 2024.

Market Response and Nvidia’s Adaptations:

Following the announcement, L&A Design’s stock price surged by the daily limit of 20%, reflecting investor confidence in the strategic decision. In response to US sanctions, Nvidia modified its chips, creating the A800 and H800 variants tailored for Chinese clients. However, subsequent controls in October restricted the sale of these modified chips to China, necessitating companies like L&A Design to explore alternative sources for their AI development needs.

Diversification Beyond Tech Firms:

L&A Design follows in the footsteps of Lotus Health, a powdered flavor maker, which previously revealed a deal to purchase Nvidia H800 GPU-based servers from Chinese server maker H3C. This growing trend underscores the broader impact of the US-China tech conflict on industries beyond the traditional technology sector.

Global Impact on Nvidia:

As US export restrictions impact Nvidia’s lower computing power AI chip products designed for the Chinese market, the company anticipates a significant hit to its fourth-quarter earnings. With over 90% of China’s $7 billion market for AI chips, Nvidia faces challenges from established players and emerging Chinese chip designers.

Chinese Chip Designers Challenge Nvidia’s Dominance:

In response to Nvidia’s challenges, Chinese chip designers, including major players like Huawei and Tencent, are aggressively entering the AI chip market. Huawei’s Ascend 910B chip and Tencent’s Zixiao AI inference chip are positioned as alternatives, with Tencent actively promoting its offerings to attract Nvidia’s clients.

Market Opportunity Amid Restrictions:

Despite potential challenges in winning orders due to production capacity constraints, Chinese chip designers view the current situation as an opportunity. US export curbs inadvertently fuel China’s self-development capability, with Chinese tech giants prioritizing sustainability over performance and building AI ecosystems without reliance on US chips.

In essence, the rush of non-tech Chinese firms towards Nvidia GPUs signals a broader reshaping of the global AI landscape, driven by geopolitical tensions and the pursuit of technological self-sufficiency.

Related:

• Nvidia Targets Vietnam for Tech Expansion, Boosting Local Chip Industry
• Nvidia collaborates with US Government amid Export curbs, faces challenges in Chinese market
• Chinese semiconductor firms turn to Malaysia for high-end Chip Assembly amid US sanctions

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