China’s Tech Giants Spend $5 Billion Buying Crippled Nvidia GPUs

Four of the largest technology companies in China have placed orders worth $5 billion for Nvidia’s A800 AI processor.

As the Financial Times reports, the spending spree was triggered by speculation that the US government could impose even stricter export controls on China. Currently, Chinese companies can’t purchase Nvidia’s A100 GPU and must instead rely on the downgraded A800, but there is a fear the A800 may also fall under wider export restrictions soon.

In response, Alibaba, Baidu, ByteDance, and Tencent decided to stockpile the GPUs. Combined, the four companies have spent $1 billion to acquire roughly 100,000 A800 GPUs this year and a further $4 billion placing orders for the GPU to be delivered in 2024.

The A800 is Nvidia’s tweaked version of the A100, with performance that falls below the existing export restrictions boundary imposed by the US government. The computational performance is the same as the A100, but the interconnect bandwidth is reduced from 600GB/s to 400GB/s. The downgrade means Chinese companies shouldn’t be able to use the A800 for large-scale AI projects or constructing supercomputers that challenge those in the top 100 list.

Nvidia created the data center-grade GPU so as to avoid losing hundreds of millions of dollars in sales to Chinese companies. That decision clearly worked and is now generating billions in revenue.

In response to the existing export restrictions, the Chinese government recently restricted exports of two vital chip-making metals. It also banned Micron chip sales claiming they pose a risk to national security. China’s problems extend much wider than the US, however, with both the Dutch and Japanese governments imposing restrictions and Germany considering limits on the country’s access to semiconductor chemicals.

As Reuters reports, today the future became a little more uncertain for China’s technology sector as President Biden signed an executive order prohibiting US investment in areas of technology classed as sensitive. That includes computer chips.