China Raises Security Concerns Over Nvidia’s H20 Chips Amid U.S. Export Restrictions and Domestic Chip Push

Although Nvidia is now allowed to sell its H20 HGX GPU to Chinese entities without a mandatory U.S. export license, the company may face new challenges in the Chinese market. According to a Reuters report, China’s Cyberspace Administration (CAC) has raised security concerns about the chip, questioning whether it could expose user data or contain hidden tracking capabilities. The CAC has summoned Nvidia to a meeting to clarify potential vulnerabilities in the H20 processor. This move comes amid growing scrutiny of U.S. technology exports, particularly in response to a U.S. legislative proposal that would require AI accelerators like the H100, H200, B100, and B200 to include tracking and location verification features. Chinese officials fear such requirements could compromise data privacy and national security. However, there are important clarifications. The H20 is a modified, lower-performance version of the H100, specifically designed for the Chinese market after the U.S. imposed export restrictions in 2023. These restrictions were aimed at limiting China’s access to high-end AI hardware. The H20 was created to comply with those rules and does not include any tracking mechanisms—making it technically distinct from the restricted models. Despite this, the CAC’s concerns may not be purely technical. Analysts suggest the scrutiny could be part of a broader strategy by Chinese authorities to reduce reliance on American technology. Beijing has been actively promoting domestic semiconductor companies such as Cambricon, Biren, and Huawei as alternatives to Nvidia and AMD. The government’s push to support homegrown AI infrastructure may be driving this regulatory push, even if it’s not yet leading to an outright ban. Tilly Zhang, an analyst at Gavekal, noted that China now has greater confidence in its domestic chip capabilities than in past years, which emboldens its willingness to challenge foreign suppliers. Still, experts acknowledge that Chinese companies remain heavily dependent on Nvidia’s hardware, especially due to the widespread use of Nvidia’s CUDA software ecosystem, which powers most AI development workflows. Charlie Chai of 86Research believes the CAC’s actions may be more symbolic than substantive—a strategic response to U.S. export policies rather than a genuine security threat. While the scrutiny is notable, it’s unlikely to result in a complete ban on Nvidia’s products in China. China has a history of raising security concerns about U.S. tech firms. In early 2023, it blocked key infrastructure companies from purchasing memory chips from Micron. Similar concerns were raised about Intel, though those did not lead to formal government actions. The current situation with Nvidia appears to follow a similar pattern—using regulatory pressure as a tool in broader geopolitical and economic negotiations.