According to the Financial Times, China is ramping up its customs crackdown to tighten control over the import of Nvidia's chips.
China is intensifying efforts to control the import of Nvidia's (NVDA) chips through a heightened customs crackdown, according to the Financial Times. In recent weeks, Beijing has deployed customs teams across major ports to conduct strict checks on semiconductor shipments. The inspections aim to ensure that local companies stop ordering Nvidia's China-specific chips in line with regulatory guidance discouraging such purchases.
The move underscores China's push to reduce reliance on American semiconductors and prove its dominance in the ongoing artificial intelligence (AI) race. At the heart of the crackdown are Nvidia's export-compliant H20 and RTX Pro 6000D processors, which are stripped-down versions of the company's advanced AI chips.
Nvidia CEO Jensen Huang has long warned of severe consequences from the U.S.' tougher chip export bans to China. The company walks a tightrope between pleasing the White House and maintaining access to one of its largest markets. After the U.S. banned the export of H20 chips, the Cyberspace Administration of China (CAC) ordered major tech companies to cancel orders and halt testing of Nvidia's products.
Beijing is also citing national security concerns over import of American chips and is urging local companies to advance the development of their own chips. As a result, Alibaba (BABA) and Baidu (BIDU) have already started using their in-house chips for training AI models. China aims to channel its resources into supporting domestic chipmakers to help them close gaps in performance and manufacturing capability.
Beijing's strict enforcement is undermining Nvidia's efforts to revive chip sales in China. Nvidia has also stopped including China chip sales in its future projections. Beijing is growing increasingly confident that the domestic chips have reached performance levels comparable to Nvidia's China-specific models. The country also aims to triple production of advanced semiconductors next year to meet the demand gap left by Nvidia.
Meanwhile, sources suggest that inspections have recently expanded to cover all advanced semiconductor products, aiming also to curb the smuggling of high-end chips that violate the U.S. export restrictions. The report noted that at least $1 billion worth of Nvidia's top AI chips were smuggled into and sold in China between May and July.
On TipRanks, NVDA stock commands a Strong Buy consensus rating based on 36 Buys, two Holds, and one Sell rating. The average Nvidia price target of $219.42 implies nearly 14% upside potential from current levels. Year-to-date, NVDA stock has gained 43.4%.