China is constructing dozens of massive data centers across the country, aiming to equip them with Nvidia’s (NVDA) advanced artificial intelligence (AI) chips. The news was first reported by Bloomberg, citing a review of government documents. Although China has set bold AI goals, its ambitions have been hindered by stringent export control rules imposed by the U.S. There is no clarity on how the firms will source the banned AI chips from Nvidia.
Don’t Miss TipRanks’ Half-Year Sale
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
- Make smarter investment decisions with TipRanks' Smart Investor Picks, delivered to your inbox every week.
According to the report, Chinese tech firms plan to install more than 115,000 NVDA AI chips across three dozen data centers in China’s remote western provinces, including a giant facility in Xinjiang. The report suggests that this level of infrastructure, if equipped with the correct chips, could be sufficient to train foundational AI models on par with DeepSeek.
U.S. Restrictions Derail China’s AI Goals
Washington began implementing chip export bans to China in 2022, fearing their misuse for advancing military capabilities. The bans have become more stringent over time and now require government licenses for the export of some of the most advanced chips. While China is making these gigantic plans, sourcing Nvidia’s GPUs (graphics processing units) remains one of its biggest challenges.
Importing such a large number of AI chips officially seems impossible because of the ban. However, the report suggests that Chinese firms may be strategizing ways to secure them indirectly, either through other countries or by sourcing them on the black market. Bloomberg also interviewed several individuals who might have knowledge of such covert operations, but none had any information.
People have also confirmed that there could currently be thousands of banned AI chips in circulation in China, but not enough to meet the massive demand outlined in the documents. Meanwhile, the report stated, “Two senior Biden administration officials said they believe there are around 25,000 banned Nvidia chips in China — a number that, one of them added, would not be terribly concerning.” These chips could only operate a mid-sized data center, not enough to support the large-scale data center plans underway in China.
Notably, Nvidia has sought to modify its AI chips by reducing their capabilities and computing power to comply with the U.S. export requirements. However, Washington continues to impose new bans to ensure these chips do not fall into the wrong hands. Meanwhile, China’s Huawei continues to manufacture AI chips with advanced capabilities. Although Huawei’s chips are not on par with Nvidia’s, they are enough to support the existing infrastructure. It remains to be seen how China’s major tech firms will source Nvidia’s advanced AI chips without attracting Washington’s attention.
Is NVDA a Good Stock to Buy Now?
Wall Street remains highly optimistic about Nvidia’s long-term stock outlook. On TipRanks, NVDA stock has a Strong Buy consensus rating based on 35 Buys, four Holds, and one Sell rating. Also, the average Nvidia price target of $175.97 implies nearly 10% upside potential from current levels. Year-to-date, NVDA stock has gained 19.2%.
