Cambricon Surges 20% as Nvidia Reportedly Halts H20 Chip Production in China

Chinese stock markets experienced a notable rally on August 22, with local chipmakers Cambricon and Hygon leading gains, following reports that Nvidia has halted production of its H20 artificial intelligence chips. The surge in domestic semiconductor companies comes amidst Beijing's reported efforts to discourage the use of Nvidia's H20 chips by Chinese firms due to escalating security concerns.

The H20 chip, a less powerful variant of Nvidia's advanced AI accelerators, was specifically designed for the Chinese market to comply with U.S. export restrictions. Earlier this year, the Trump administration had reportedly approved the resumption of H20 sales to China, albeit with a controversial condition requiring Nvidia to remit 15% of the chip's revenue to the U.S. government.

However, recent reports from Bloomberg and The Information indicate that Chinese authorities, including the Cyberspace Administration of China (CAC), have urged local companies to avoid the H20, citing potential security risks and fears of "backdoors" that could allow U.S. access to sensitive data. Nvidia CEO Jensen Huang has denied these allegations, stating, "NVIDIA does not have 'backdoors' in our chips that would give anyone a remote way to access or control them."

This shift in stance from Beijing has significantly boosted the prospects of domestic alternatives. As stated in the tweet, "Chinese stocks rally on August 22, driven by gains in local chipmakers Cambricon and Hygon." Cambricon's shares, in particular, soared by as much as 20% on Friday, reflecting investor confidence in China's push for technological self-sufficiency in critical semiconductor components. Huawei Technologies is also developing chips that rival the H20's performance.

Nvidia acknowledged that it "constantly manage[s] our supply chain to address market conditions" in response to the reports. The company, which is expected to report earnings next week, had previously written off $5.5 billion in H20 inventory after an earlier ban. The reported production halt creates new uncertainties for Nvidia's business in China, a market that generated $17 billion in revenue for the chipmaker last year.