China's Markets Still Manage To Get Nvidia AI Chips Via Smuggling: Report

Nvidia Corp NVDA artificial intelligence chips are still selling in Chinese markets at discounted rates of up to 60% after entering the country via smuggling and other channels.

Smaller Chinese cloud providers are renting Nvidia AI servers at $6 an hour versus the $10 an hour charged by their U.S. counterparts despite the U.S. semiconductor sanctions, the Financial Times reports.

It signals that Chinese tech giants remain heavily invested in their AI ambitions despite the export controls.

The discounts reflect the vast availability of the banned A100 and H100 chips, advertised for sale on Chinese social media and e-commerce sites like Alibaba Group Holding’s BABA Taobao and in electronics markets at a slight premium, as per FT.

The black market also highlights China’s cheaper labor and resources, allowing smaller vendors to remain competitive despite illegally sourcing components.

FT noted that Alibaba and ByteDance charge twice to fourfold the price of smaller local vendors due to stricter regulatory compliance.

Recent reports claimed Alibaba, Tencent Holding TCEHY, and Baidu Inc BIDU spent 50 billion Chinese Yuan ($7 billion) on capital expenditures in the first half of 2024, compared to 23 billion Chinese Yuan a year ago.

China earmarked 43.5 billion yuan ($6.12 billion) for computing data centers, according to the National Data Bureau.

Nvidia had maintained that the semiconductor sanctions had minimal to no impact on business, while companies like Alibaba acknowledged the downsides of the export controls.

Price Action: NVDA stock traded lower by 1.54% at $105.58 premarket at the last check Friday.

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