China has ordered state-funded data centers to use only Chinese AI chips, and ordered them to withdraw or cancel the use of foreign chips in unfinished projects.
On November 5, 2025, at 4:07 PM, Reuters reported that the Chinese government had issued new guidelines requiring new state-funded data centers to use only domestically produced artificial intelligence (AI) chips. This is considered one of China's most aggressive measures to reduce its dependence on foreign technology and accelerate its goal of technological sovereignty.
Chinese regulators have reportedly told developers of data center projects with less than 30% of their units under construction to either remove all foreign chips or cancel related orders, with projects with more progress being reviewed on a case-by-case basis.
The new measures come as trade tensions between China and the US ease after President Donald Trump said last week that the US would let China buy Nvidia chips, but not the most advanced models. But Beijing's latest decision could cost Nvidia the Chinese market entirely, while also paving the way for local companies like Huawei, Cambricon, MetaX, Moore Threads and Enflame to expand their market share.
Reuters data shows that since 2564, the Chinese government has injected more than $100,000 billion into AI data center projects, with most of it partially funded by the state, which will put many of them under new policies.
Sources say some projects have been put on hold before construction even begins, such as a data center in a northwestern province planned to use Nvidia chips, which has now been temporarily suspended.
In addition to Nvidia, the measure also affects other foreign chipmakers, including AMD and Intel. Nvidia's H20 AI chip, the highest model allowed by the US to be sold in China, will also be subject to the ban, as will the B200 and H200 models, which are also officially banned from export by the US.
Analysts see the measure as a double-edged sword. On the one hand, it will help accelerate sales and development of Chinese manufacturers' chips, but on the other hand, it could widen the computing power gap between China and the United States. While American companies like Microsoft, Meta and OpenAI have invested heavily in data centers using high-end Nvidia chips, China still faces restrictions on its semiconductor manufacturing equipment due to US sanctions.
This new measure is a clear signal that China is moving to cut off foreign technology in critical infrastructure such as data centers and aims to build an AI ecosystem fully powered by Chinese chips.
Reference: reuters.com
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