Blow For Nvidia? Baidu Reportedly Switches To Huawei For AI Chips, Ditching Its Long-time Supplier

In a significant industry shift, Baidu Inc. BIDU reportedly ordered AI chips from Huawei moving away from long-time supplier Nvidia Corporation NVDA, signaling changes in global tech alliances.

What Happened: Baidu secured a deal with Huawei for the supply of artificial intelligence chips, marking a pivot from its usual supplier, Nvidia, Reuters reported. This move is attributed to increasing U.S. restrictions on tech exports to China.

Reuters’ sources revealed that the order, placed in August, included 1,600 Huawei Ascend 910B AI chips, intended for 200 servers. By October, over 60% of the orders had already been delivered to Baidu. The deal, worth around 450 million yuan ($61.83 million), is expected to be fulfilled by year’s end.

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This shift, although minor relative to the volume of chips usually sourced from Nvidia, is a clear indicator of Chinese tech firms adjusting to geopolitical pressures. Baidu, similar to its peers Tencent and Alibaba, has been a substantial Nvidia customer but has now turned to Huawei for its AI chip needs.

Why It Matters: Despite the perceived performance gap between Huawei’s and Nvidia’s chips, the Ascend 910B is considered the most advanced domestic option in China. Baidu’s decision is seen as a strategic preparation for potential future restrictions on purchasing from Nvidia.

While Baidu has produced its own Kunlun AI chips, the company has predominantly relied on Nvidia’s A100 chip for training its large language model (LLM). Following U.S. sanctions that barred Nvidia from selling its A100 and H100 chips in China, Nvidia released the A800 and H800 as alternatives, which are now also restricted by the latest October regulations.

Huawei’s advancements in chip development have been noteworthy, especially given U.S. export controls since 2019. The company’s progress, including the unexpected launch of a new smartphone with internally developed processors and the shipment of Chinese-made processors for surveillance cameras, underscores its resilience against sanctions.

Price Action: NVDA shares traded lower by 0.28% at $456.22 after market hours on Monday.

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