Chinese businesses are pulling back from Nvidia's high-end AI accelerators and turning to homegrown alternatives. This is a shift that reflects both escalating US-China tech tensions and Beijing's long-running campaign to reduce reliance on American semiconductor technology.
China's Domestic Chip Spending Set to Surge
According to a new Bloomberg Intelligence survey published Tuesday (July 7), Chinese executives expect to direct 46 per cent of their AI accelerator budgets toward locally made chips over the coming year, a sharp rise from the 30 per cent share domestic suppliers currently command. The survey also found that 80 per cent of respondents are already exceeding their infrastructure budgets for 2026, with the soaring cost of AI buildouts cited as the main driver of the overspend. Bloomberg Intelligence polled 60 executives across China's software, finance, manufacturing and retail sectors to gauge how quickly the country's AI hardware ecosystem is shifting away from foreign suppliers.
Who Stands to Benefit
The report singled out Tencent, Alibaba and Huawei Technologies as the companies best placed to capitalise on the pivot, given their scale as both infrastructure builders and chip suppliers within China's AI economy. Beyond the three giants, chipmakers Hygon Information Technology and Cambricon Technologies are also gaining traction, with a significant number of survey respondents reporting they are actively testing accelerators from both firms. Bloomberg Intelligence noted that China's localisation drive in semiconductors is showing tangible progress, positioning firms like Huawei and Hygon to capture a growing share of demand.
NVIDIA's Shrinking Foothold
Despite the shift, Nvidia's chips have not lost all appeal in the Chinese market. However, the survey suggests the US chipmaker's market share will continue to erode as its China-specific H20 processors become increasingly difficult to source. Beijing has previously discouraged domestic tech firms from relying on the H20, adding further pressure on Nvidia's position in the country.
Beijing's Broader Data Centre Push
The findings arrive as China moves ahead with a roughly 2 trillion yuan (US$294 billion) plan to expand data centre capacity nationwide over the next five years. The state-backed initiative aims to embed AI more deeply across industries ranging from healthcare to urban management. Bloomberg News has reported that Beijing wants at least 80 per cent of the core technology used in these facilities, including chips, to come from domestic suppliers.
Even as computing power becomes more localised, a separate constraint is emerging. A global shortage of memory chips is expected to limit growth for some Chinese AI hardware players, including Semiconductor Manufacturing International Corporation. ChangXin Memory Technologies, by contrast, appears well-positioned to benefit from the squeeze. The Bloomberg Intelligence report points to a broader shift in where the industry's real constraints lie; rather than raw processing power, the pinch point is increasingly the supply of high-bandwidth memory chips, which are important for moving data quickly enough to keep pace with AI workloads.
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