China

China’s AI chip sector is rapidly advancing, with startups and tech giants like Huawei striving to challenge Nvidia. Fueled by substantial government investment and a robust energy infrastructure, Chinese companies are accelerating domestic chip development. While still trailing U.S. counterparts, the performance gap is narrowing significantly, positioning China to become a major force in AI hardware.

Meta’s $2 billion acquisition of AI startup Manus is under review by Chinese authorities, raising concerns about technology control. This coincides with Meta’s planned subscription models for Instagram, Facebook, and WhatsApp, which will offer enhanced AI features and tools, potentially recouping investments and creating new revenue streams. These AI-centric subscriptions are separate from Meta Verified and aim to provide advanced capabilities to a broader user base.

Nvidia CEO Jensen Huang is visiting China before the Lunar New Year amidst U.S. export restrictions impacting the company’s significant Chinese market. Historically a major revenue source, Nvidia’s advanced AI chip sales are now restricted. Huang will attend an event in Beijing and meet clients, addressing supply challenges. While China might approve H200 chips for limited research, the broader impact on Nvidia’s market share is uncertain. This visit highlights Nvidia’s commitment to China and its strategy to navigate complex geopolitical and technological shifts in the AI industry.

Washington is divided over Nvidia’s AI chip sales to China. The proposed “AI Overwatch Act” seeks to give Congress oversight on advanced AI chip exports, requiring joint committee approval for licenses. Proponents argue these chips pose a national security risk, potentially aiding China’s military. Critics, however, believe such sales maintain U.S. technological dominance and spur domestic innovation. The debate highlights a clash between national security concerns and economic strategy in the AI race.

The US and Denmark remain in disagreement over Washington’s interest in Greenland, with no agreement reached. Geopolitical tensions could have significant consequences. Separately, the US indicated a potential de-escalation with Iran, impacting oil prices. Domestic markets saw a dip in chip stocks, though AI demand remains strong. Key developments include US visa policy changes, a surge in Toyota Industries’ shares, a Chinese probe into Trip.com, mixed market performances, and a continued rally in gold and silver. China’s AI chip sector is seeing IPOs, with Huawei’s HiSilicon noted for its potential.

China’s AI chip self-sufficiency drive sees investor interest in newly public firms like Biren and Moore Threads. However, tech giant Huawei and its HiSilicon division are considered the true leaders, offering a comprehensive ecosystem rather than just individual chips. Analysts predict Huawei could dominate China’s market, especially if Nvidia faces export restrictions. Production constraints at SMIC, with Huawei receiving priority, pose challenges for smaller rivals. Huawei’s private status is expected to continue, supported by its strong existing businesses and government backing.

The Trump administration has approved sales of Nvidia’s H200 AI chips to China, while also imposing a 25% tariff on these transactions. This move permits competition for Nvidia and other U.S. chip companies in the significant Chinese market, with the U.S. government set to collect revenue through tariffs. The decision comes with conditions to ensure U.S. supply and security, and follows Nvidia’s confirmation of high demand for the H200 from Chinese customers.

China is reviewing Meta’s $2 billion acquisition of AI startup Manus, focusing on potential violations of technology control regulations. The investigation by Beijing’s Ministry of Commerce aims to ensure compliance with export controls and overseas investment laws, signaling China’s determination to protect its strategic technological assets, especially in AI. The probe is unlikely to block the deal entirely but could impose conditions and give China leverage.

Nvidia CEO Jensen Huang stated that demand for H200 AI chips in China is “very high,” following potential U.S. export approval. The company has reactivated its supply chain and is finalizing export license details. These chips are crucial for AI development, and the Chinese market holds significant potential for Nvidia. Huang anticipates sales will be incremental to existing forecasts, with China’s regulatory approval likely indicated by purchase orders rather than formal announcements.

Federal prosecutors in Texas have disrupted “Operation Gatekeeper,” a large-scale smuggling ring allegedly funneling high-demand Nvidia GPUs to China. The operation involved circumventing U.S. export controls through shell companies and misclassified shipments. This highlights the intense U.S.-China tech competition. Following the bust, a presidential announcement permitting some Nvidia GPU exports to China has created complexities for the prosecution.