Chinese tech firms reportedly lock in Nvidia capacity as spy scandal fuels restriction fears

Rather than prompting a retreat, the controversy is driving Chinese technology companies to lock in as much Nvidia computing capacity as possible ahead of potential Washington measures.

According to Reuters, which cited three sources, Chinese artificial intelligence firms are seeking additional Nvidia cloud computing capacity at data centres abroad. They are concerned that the controversy involving CEO Jensen Huang might hasten stricter US controls.

The sources indicated that a leading Chinese cloud company has already talked about securing capacity overseas, and smaller AI enterprises are also looking into comparable deals, with Southeast Asia being a focus.

The anxiety among Chinese technology companies is not unfounded. Washington already limits China's ability to obtain Nvidia's top-tier AI semiconductors. Yet these businesses have circumvented some limitations by leasing computing power from data centres located beyond US borders.

The current worry is that this workaround might become a target of the latest political fallout.

Essentially, the scandal involving Huang and a woman believed to be a Chinese spy has provided legislators with new justification to pursue stricter export regulations.

A specific focus is the proposed Remote Access Security Act (RASA). This legislation would expand Washington's power to oversee foreign cloud usage of restricted US technology. It cleared the House in January and is pending Senate approval.

Additionally, Reuters reports that buyers on the grey market in China are amassing restricted Nvidia chips, concerned about a wider clampdown on chip smuggling.

The situation is escalating, and Nvidia is not the only one under strain.

Should the US impose restrictions on cloud access abroad, Chinese AI developers would likely see increased computing expenses and capacity restrictions. At the same time, Nvidia and foreign data-centre operators could lose a significant customer base.

This would create additional turbulence and might further unsettle the already volatile AI market heading into the weekend.