Nvidia Sees Rush For H20 AI Chip Orders As DeepSeek Disrupts AI Market— Tencent, Alibaba, ByteDance Fuel Demand Surge

Chinese tech giants Tencent Holdings TCEHY, Alibaba Group Holdings Ltd BABA, and ByteDance have significantly increased orders for Nvidia Corporation's NVDA H20 AI chips, as the rise of DeepSeek's low-cost AI models drives a surge in demand for AI computing power.

What Happened: The spike in H20 chip orders, reported by Reuters, citing six people familiar with the matter, highlights Nvidia's continued dominance in the AI chip market.

The H20 is a China-specific chip, developed in response to U.S. export restrictions that prevent Nvidia from selling its most advanced AI hardware to Chinese companies.

While concerns about additional U.S. trade restrictions exist, sources say the primary driver behind the demand is DeepSeek's AI models, which optimize computational efficiency for inference tasks rather than relying solely on raw processing power.

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These models have gained rapid adoption across industries, from cloud computing to automotive applications.

Tencent is reportedly testing DeepSeek's AI models in WeChat, while automaker Great Wall has integrated them into its connected vehicle systems. Analysts estimate Nvidia shipped around 1 million H20 chips in 2024, generating over $12 billion in revenue.

Why It Matters: Last month, Nvidia recognized China's DeepSeek R1 AI model. The model built for less than $6 million, allegedly outperformed top U.S. models, including those from OpenAI.

This milestone contributed to a broader tech market downturn, leading to a 17% decline in Nvidia's stock and a more than 20% plunge in AI infrastructure shares. It also led to a $600 billion drop in Nvidia's market capitalization.

Earlier this month, in an interview, Nvidia CEO Jensen Huang addressed investor concerns, attributing the sell-off to misconceptions about AI infrastructure spending.

Price Action: In after-hours trading, Nvidia rose 0.51%, reaching $130.95 at the time of publication, according to Benzinga Pro.

Image via Shutterstock

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.