Overview

• Baidu, one of China's leading AI firms, has shifted from Nvidia to Huawei for its AI chips, ordering 1,600 Ascend 910B chips. These Huawei chips are heralded as the most sophisticated domestic option available in China, albeit inferior in performance compared to Nvidia's offerings.
• This strategic move is seen as a response to increasingly rigid U.S. restrictions on tech exports to China, including Nvidia chips. It indicates Chinese companies' growing reliance on non-U.S. suppliers despite the perceived performance gap.
• Chinese companies have been stockpiling Nvidia chips in anticipation of further restrictions. The US restrictions have created an opportunity for Huawei to expand its $7 billion domestic AI chip market.
• Despite its pivot to Huawei's chips, Baidu continues to rely predominantly on Nvidia's A100 chip to train its large language models. After the U.S. barred Nvidia from selling its A100 and H100 chips to China, Nvidia issued A800 and H800 alternatives, which are now also restricted.
• Huawei's Ascend chips development showcases the company's resilience against sanctions and signals China's accelerated investment in domestic semiconductor industry to replace foreign technology with domestic alternatives.