After months of back and forth, Nvidia has reportedly paused making its H20 chip due to security concerns, this time from China

Nvidia's H20, an AI and compute chip specifically modified for use in the Chinese market, has reportedly stopped production in the midst of security concerns from Chinese officials.

As reported by the Information, and citing "two people with direct knowledge of the communications", Nvidia has reportedly "told some of its component suppliers to suspend production work." Amkor Technology and Samsung are two companies which were reportedly told about this new development.

But first, a quick rundown on Nvidia's H20 chip. It is effectively a less powerful, modified version of the H100 GPU, a large-scale processor that is used for AI workloads, data analysis, and more. In April, Nvidia was set to lose $5.5 billion due to trade restrictions on chips to China. A month after this, export controls made Nvidia write the chip off entirely.

Then, by July, the US government had signed off on Nvidia selling its chips in the Chinese market. In return, the US would see 15% of the revenue made from these sales. This was promptly hit by concerns from the Chinese government about backdoors in chips (this was suggested by some US politicians).

Nvidia was adamant that there are no backdoors in its chips, but still, the Cyberspace Administration of China halted the sale of H20 chips due to security concerns.

Just last week, China reportedly told data center operators to source the majority of its chips from domestic manufacturers instead. This is part of a broader plan to move away from relying on US tech. According to the Information, ByteDance, Alibaba Group, and Tencent Holdings were among the firms pushed just last week to suspend any purchases of Nvidia chips.

It's been a wild couple of months for Nvidia when it comes to this specific chip. It reportedly saw demand accounting for 700,000 H20 chips after declaring it could go on sale, which is why the halting of production feels like a particularly strong blow.

Nvidia's Jensen Huang has made it clear his desire to provide chips to China. In response to the original chip export controls, he said, "If they don't have enough Nvidia, they will use their own." He has also said that Chinese competitors are "quite formidable", whilst also arguing that the Chinese military wouldn't use US chips as "they simply can't rely on it."

Effectively, he doesn't seem to think that Nvidia is giving China an edge when it comes to the AI land grab, and the potential of extra cash from the region certainly couldn't hurt Nvidia or its stockholders' view of the company.