Nvidia's H20 Chip Orders Surge Amid Chinese Firms' Adoption of DeepSeek AI Models

Nvidia's H20 artificial intelligence (AI) chip orders have surged in China, driven by the adoption of DeepSeek's low-cost AI models by local companies, according to six sources familiar with the matter. This development underscores Nvidia's dominance in the AI chip market and could help alleviate concerns about a potential slide in demand for AI chips.

Chinese tech giants Tencent, Alibaba, and ByteDance have significantly increased their orders of the H20 chip since DeepSeek burst onto the global scene last month. In addition to their internal needs for advanced AI chips, these companies provide cloud computing services, enabling other firms to access and use AI tools. Smaller companies in sectors like healthcare and education are also purchasing AI servers equipped with DeepSeek models and Nvidia H20 chips, indicating a broader trend of AI adoption across various industries.



The surge in orders comes as the U.S. government considers imposing further restrictions on the sale of the H20 chip to China. However, sources cited DeepSeek as the primary reason for the jump in orders, suggesting that the increased demand is not solely due to stockpiling in anticipation of export controls. Instead, Chinese companies are genuinely interested in Nvidia's products and the capabilities they offer.

Nvidia's H20 chip remains the industry standard in China, despite the wider deployment of DeepSeek AI models. Analysts estimate that Nvidia shipped approximately 1 million H20 units in 2024, generating over $12 billion in revenue for the company. The H20 is the primary chip Nvidia is legally permitted to sell in China following the latest round of U.S. export restrictions.



The adoption of DeepSeek's AI models by Chinese companies could have several implications for the global AI chip market and Nvidia's competitive position. While the low-cost nature of DeepSeek's models might initially raise concerns about a potential impact on Nvidia's pricing power, the strong demand for the H20 chip indicates that Chinese companies still value the performance and capabilities offered by Nvidia's products. Furthermore, the accelerated AI adoption and integration driven by DeepSeek's models could lead to increased demand for AI chips, benefiting Nvidia and its competitors.

Geopolitical tensions between the U.S. and China are also expected to influence the demand for Nvidia's H20 chip and the adoption of DeepSeek's AI models in the Chinese market. U.S. export controls have led to increased orders of the H20 chip, while Chinese companies are adopting DeepSeek's models to support the domestic AI industry and reduce their dependence on foreign technology. This dynamic could potentially lead to a decrease in Nvidia's market share in the long run, as Chinese companies seek to reduce their reliance on foreign technology.

In conclusion, the increased demand for Nvidia's H20 chip in China, driven by the adoption of DeepSeek's low-cost AI models, is expected to have a positive impact on the company's revenue and market share in the long term. While U.S. export restrictions and the potential competition from Chinese chipmakers pose challenges, Nvidia's dominance in the AI chip market and the strong demand for its products suggest that the company will continue to thrive.