Psst! Where may Chinese buyers acquire high-end Nvidia (NVDA.O) AI chips after U.S. sanctions?
The SEG Plaza skyscraper in Shenzhen’s Huaqiangbei electronics district has businesses selling camera parts and drones on its first ten levels. Asking works discreetly.
They’re pricey. Two anonymous vendors told Reuters they could sell small quantities of the U.S. chip designer’s A100 artificial intelligence chips for $20,000 each.
U.S. export restrictions have created a de facto underground market in China for high-end U.S. chips.
In September, President Joe Biden’s administration ordered Nvidia to stop exporting its two most advanced chips, the A100 and the recently developed H100, to mainland China and Hong Kong to slow Chinese AI and supercomputing development amid rising political and trade tensions. Semiconductor export controls followed.
After OpenAI’s ChatGPT’s global success, demand for high-end chips, especially Nvidia’s, has skyrocketed.
“We are talking with two vendors now to get some,” said Hong Kong’s Pantheon Lab co-founder Ivan Lau, who wants 2-4 new A100 cards to run the startup’s latest AI models.
“They told us straight up that there will be no warranty or support,” he claimed of vendors that bought chips outside the U.S. and quoted HK$150,000 ($19,150) per card.
Ten Hong Kong and mainland Chinese sellers told Reuters they could easily buy small numbers of A100s. Their data showed China’s high chip demand and Washington’s sanctions’ ease of circumvention for small-batch transactions.
Reuters could not estimate Nvidia A100 and H100 chip volumes entering China or how much they satisfy demand.
The sellers, who declined to be identified due to U.S. trade prohibitions, claimed buyers are app developers, entrepreneurs, researchers, and gamers. One merchant said Chinese local authorities bought.
Nvidia told Reuters it did not ship the A100 or H100 to China, instead offering reduced-capability replacements that conform with U.S. legislation.
“If we receive information that a customer is breaching their agreement with us and exporting restricted products in violation of the law, we would take immediate and appropriate action,” the statement stated.
A U.S. Department of Commerce spokeswoman told Reuters that export controls have had a “substantial impact” on China’s high-end chip availability.
The statement claimed “allegations of violations are investigated” and that “reports of parties seeking these chips through illicit means are not a surprise.”
China’s State Council Information Office and industries ministry declined to comment.
In September, Nvidia warned that Chinese enterprises might not buy its alternative products, costing $400 million in third-quarter sales.
Tencent Holdings (0700. HK) and Alibaba (9988. HK), which have strong pockets to buy massive numbers, are buying its new China-tailored slower models, the A800 and H800, to buffer that impact.
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The Chinese vendors said they mostly bought chips from leftover stock after Nvidia sent significant volumes to huge U.S. corporations or domestically formed companies in India, Taiwan, and Singapore.
They cannot secure enough to create a smart AI large language model from scratch.
TrendForce estimates that OpenAI’s GPT would require over 30,000 Nvidia A100 GPUs. A few can perform sophisticated machine-learning tasks and improve AI models.
An electronics procurement website found 40 A100 dealers in Huaqiangbei. A100s were also listed on Alibaba’s (9988. HK) Taobao e-commerce site, Xiaohongshu, like Instagram, and Douyin, the Chinese version of TikTok. Alibaba, Xiaohongshu, and Douyin-owner ByteDance declined to comment.
Some suppliers warned that A100 fraud was frequent with remanufactured chips. Nvidia’s newer H100 processors, released in March, are scarcer.
Vinci Chow, an economics lecturer at the Chinese University of Hong Kong whose department had purchased four A100 cards from local merchants for study, said he had been assured that packs of eight H100 chips were available. Only one of Reuters’ 10 vendors could buy H100s.
According to Shanghai-based 86Research analyst Charlie Chai, the U.S. is unlikely to care about little chip transactions.
“Only if/when China poses a greater threat following significant catch-ups will we see more strict enforcement,” he said.
As many Chinese AI firms exit the market, Chinese vendors’ A100 and H100 chip premiums could fall.
