The latest US prohibition is prompting Chinese firms to step up their chip purchases, which is resulting in a surge in demand and prices for Nvidia's RTX 5090 GPU before its release, according to industry sources.
US President Joe Biden announced a new prohibition on AI chips prior to his departure from office.
US tightens AI export ban to target China's procurement loopholes
According to pertinent industry sources, the US government must intervene to address the deficiencies of the previous prohibition, irrespective of the Biden administration's political strategies. Demand for Nvidia's complete AI GPU portfolio has surged markedly following the ban announcement, along with orders for the upcoming RTX 5090.
Consistent with previous instances, China is increasing its procurement of downgraded chips from Nvidia, AMD, and Intel while also accelerating access to regulated chips through stockpiling, smuggling, and third-party intermediaries. The practice of "purchasing as extensively as feasible" has resulted in the tripling of both GPU price and volume, the sources indicated.
Biden's new Interim Final Rule on Artificial Intelligence Diffusion establishes tiered controls that categorize China, Russia, and 22 additional countries as Level Three, so entirely barring the export of powerful AI chips to these nations. Furthermore, regulation now encompasses closed-weight frontier AI models. This proposal will provide the industry with one year to make adjustments and 120 days for public comments.
According to supply chain sources, the US government's tightening of AI regulations aims to close various loopholes that have existed since the initial AI-related prohibitions were declared in 2022, preventing China from obtaining additional prohibited older or second-hand A100/H100/H200 and the most recent B200 AI GPUs through Southeast Asian nations such as Singapore.
China seeks ways around AI chip ban
Despite the fact that China has been unable to acquire H100 and H200 AI GPUs since the issuance of the AI chip ban in 2022, it has been able to acquire downgraded processors from Nvidia and AMD. Nevertheless, those who are involved in the distribution channels are aware that Chinese companies can devise methods to circumvent the acquisition of the desired AI processors, according to industry sources.
Such transactions frequently take place in subterranean illegal markets, where some pay a premium for procurement and others supply the items. Overseas personnel facilitate shipments, smuggle, and set up shell corporations in unregulated nations such as the Middle East, Singapore, and Malaysia. These companies buy AI servers in bulk from Nvidia or other server providers and then resell them at premium prices in China. Despite vast stocks, they are still unable to supply China's massive demand for AI servers.
Rumors have been circulating that Supermicro may be involved as a result of the high-profile purchasing activities of Chinese operators over the past two years, which has resulted in increased scrutiny from the US government. The most recent moratorium on AI chips has been in the works for an extended period of time and has now been implemented.
Nvidia and partners outperform expectations despite ban
Recent bans on AI GPUs, particularly the premium RTX 4090, have resulted in increased demand, as the ban has not mitigated China's pressing demand for AI chips, according to industry sources. Nvidia and graphics card manufacturers have maintained stable shipments and performance over the last two years, thanks to extensive stockpiling through overseas channels.
Notably, since the implementation of US sanctions, Nvidia's performance has been resilient, routinely outperforming expectations each quarter.
In 2024, the top three graphics card brands—Asus, MSI, and Gigabyte—saw consistent growth in graphics card shipments. Asus and MSI each sold 5.5 million to 5.6 million units. The RTX 50 series is anticipated to generate even greater revenue for them in 2025, the sources said.
Due to strong demand from China, top graphics card makers have raised their shipment projections to between 5.8 million and 6 million units. Furthermore, the official price of the premium RTX 5090 has increased by 25% over its predecessor, the RTX 4090, to US$1999. The supply-demand gap is projected to drive prices even higher.
Market speculation indicates that China is increasing its purchases of Nvidia's AI GPUs and RTX 4090 devices in response to the recent announcement of the US AI chip prohibition. This is expected to result in a substantial increase in orders for the upcoming RTX 5090. GPU prices and volume are once again being driven up by the "buy as much as possible" strategy, the sources said.
Current operations for Nvidia and affiliated supply chains are unaffected. It remains to be determined whether US President-elect Donald Trump will implement aggressive measures to address the gaps left by previous ineffectual AI chip bans.
Article translated by Jessie Shen
