Chinese companies aren't interested in Nvidia's slower AI chips

• Nvidia recently unveiled a slower, less powerful AI chip for sale in China.
• The new chip allows Nvidia to comply with US export rules.

Nvidia, the world's leading AI chipmaker, recently unveiled a slower, less powerful version of a gaming processor that complies with US export controls and can be sold in China.

The GeForce RTX 4090 D chip will go on sale in January, but Nvidia is already experiencing some headwinds, with some of China's largest cloud companies indicating that they don't want to buy the chips.

Alibaba Group, Tencent, Baidu, and TikTok owner ByteDance have all suggested that they're planning to order far fewer chips from the American company this year now that its most powerful chips aren't on offer, The Wall Street Journal reported.

By downgrading its chips, there is far less of a performance gap compared with locally-made, Chinese alternatives, meaning the companies may start to shop at home instead, per the report.

Chinese firms are also concerned about potential increases to US restrictions.

The Biden Administration has made it clear that it's aiming to slow China's technological advancements, introducing a series of export restrictions in October aimed at stunting the country's chip industry.

That's led to tech companies starting to prepare for a world with less access to Nvidia's chips.

Jensen Huang, Nvidia's CEO, previously told the Financial Times that US export controls were like having "our hands tied behind our back."

China has been a crucial market for Nvidia, making up around 20% of the company's revenue, Huang said recently, per Reuters.

The California company has also enjoyed a more than 90% share of China's $7 billion AI chip market.