Key points
- Nvidia reportedly requires cloud partners to serve more non-China customers
- Nvidia's rule covers new contracts worldwide, not just in Asia
- Nvidia didn't confirm the rule but defended American cloud build-outs
Nvidia (NVDA) is telling the cloud companies that rent out its AI chips that at least 51% of their services must go to customers outside China, the Financial Times reported on November 3. Under new contracts, Chinese customers could account for no more than 49% of a provider's services.
Nvidia neither confirmed nor denied the report. Its shares were at $206.13 in premarket trading as of 8:24 a.m. ET, up 2.0% from its November 2 close of $202.06.
What the 51% rule covers
The requirement applies to Nvidia's cloud and data center partners, the companies that buy its chips and rent computing power to others, including AI developers that train models. Two people told the FT it applies to those partners globally, not only to data centers in Asia.
The rule only affects future contracts. Existing lease agreements aren't covered. The FT said the instructions were passed on verbally through Nvidia's sales and regional teams rather than in writing.
Why it matters for cloud providers outside the US
US export rules bar Nvidia from selling its most advanced chips to Chinese companies. Some Chinese AI developers have rented computing power from data centers outside China, including to train new models, according to the FT. The new requirement would limit how much of that capacity Nvidia's partners can sell to Chinese customers under future contracts.
A Singapore-based group told the FT that it was "difficult to find enough non-Chinese clients outside the US" and that strict enforcement "will definitely hurt business."
Nvidia has faced scrutiny over where its chips end up. A California executive was charged with smuggling more than $300 million of servers containing Nvidia chips to China, though Nvidia isn't accused of wrongdoing. Nvidia has also defended CEO Jensen Huang's ties to an executive at customer Megaspeed whom US intelligence agencies suspected of gathering information for Beijing.
What Nvidia said
In a statement, Nvidia said: "Datacentres and clouds built on American chips are the foundation that American model and application makers need to compete worldwide." It added: "Longstanding US policy encourages every cloud to build on American infrastructure and to win business everywhere they can."
China's foreign ministry spokeswoman, Mao Ning, said she wasn't aware of the report and that Beijing hopes for a "fair, transparent and non-discriminatory business environment" for companies from all countries, according to AFP.
