Nvidia shares drop, China tech surges as Beijing tries to push homegrown AI chips

Group 1 - Nvidia faces regulatory challenges in China as the Cyberspace Administration of China has instructed major tech firms to halt testing of its RTX Pro 6000D chip, leading to a 2.5% drop in Nvidia's shares [1] - Despite Nvidia's stock decline, Chinese tech stocks have surged, with the Hang Seng Tech Index rising by 4.2% to its highest point in four years, and up 45% year-to-date [2] - The RTX Pro 6000D, launched in July, is Nvidia's attempt to create a chip compliant with U.S. export controls for the Chinese market, following restrictions on selling advanced products to Chinese companies since 2022 [3] Group 2 - Chinese chip designers like Huawei and Cambricon are catching up, with domestic processors now potentially offering competitive alternatives to Nvidia's products allowed in China [4] - Nvidia has acknowledged the risk of being unable to create a competitive product for China's data center market that meets U.S. government approval, which could exclude it from this market [5] - Nvidia reported a decline in sales to Chinese customers, with $2.8 billion last quarter compared to $3.7 billion a year ago, excluding any sales of the H20 chip [6] Group 3 - The U.S. government recognizes the competition Nvidia faces and has indicated the importance of keeping Chinese companies reliant on U.S. chips, which may influence export license decisions for products like the H20 [6] - Nvidia has removed China sales from its forward guidance due to geopolitical uncertainties, but the CFO suggested potential sales of up to $5 billion if the H20 were permitted for sale in China [7]