Exclusive: China Bans Foreign AI Chips From State-Funded Data Centres, Sources Say

In a major escalation of the U.S.-China technology war, Beijing has issued a new directive banning the use of foreign-made artificial intelligence (AI) chips in all new state-funded data center projects, according to multiple sources familiar with the matter.

The move, one of China's most aggressive steps yet toward technological self-sufficiency, is a direct blow to U.S. chipmakers like Nvidia, AMD, and Intel, and is set to accelerate the growth of China's domestic semiconductor industry.

According to the guidance, any new data center projects receiving government funding must exclusively use domestically produced AI chips. The directive is reportedly already being enforced, with regulators ordering projects that are less than 30% complete to halt construction, remove all installed foreign-made chips, and cancel any existing orders for them.


Projects that are in more advanced stages of completion will be reviewed on a case-by-case basis.

This new policy effectively shuts foreign chipmakers out of a massive and growing market. AI data center projects in China have reportedly attracted over $100 billion in state funding since 2021, and most large-scale data centers in the country receive some form of government support, making the scope of the ban extensive.


The directive specifically targets high-performance AI accelerators from U.S. companies. This includes not only the most powerful chips like Nvidia's B200 and H200—which are already banned for export to China by U.S. rules but are available on the grey market—but also the less powerful, custom-designed H20 chip that Nvidia created specifically to comply with U.S. restrictions for the Chinese market.


This ban is the latest in a series of tit-for-tat moves between Washington and Beijing. The U.S. has progressively tightened export controls, citing concerns that advanced American AI technology could be used to strengthen the Chinese military. In response, Beijing has accelerated its campaign to "eliminate foreign technology" from its critical infrastructure.



For Nvidia, this directive solidifies the collapse of its business in a market it once dominated. According to company figures, its market share for AI chips in China has plummeted from 95% in 2022 to effectively zero today.


The policy is a clear boon for domestic Chinese chipmakers like Huawei, as well as a growing list of startups such as MetaX and Cambricon, which will now be the default suppliers for the nation's state-backed AI infrastructure build-out.