Howard Lutnick's 'Insulting' Words Trigger Backlash In Beijing As Regulators Pressure Alibaba, ByteDance To Shun Nvidia Chips: Report

Beijing has reportedly moved to curb sales of Nvidia Corporation's NVDA China-specific AI chip after U.S. Commerce Secretary Howard Lutnick made remarks about export policy that Chinese officials reportedly found "insulting."

Chinese Regulators Push Alibaba, ByteDance to Slash H20 Chip Orders

Multiple Chinese regulators — including the Cyberspace Administration of China, the National Development and Reform Commission and the Ministry of Industry and Information Technology — mobilized after Lutnick's comments in July, reported the Financial Times, citing people familiar with the matter.

Last month, Lutnick told CNBC, "We don't sell them our best stuff, not our second-best stuff, not even our third-best," adding, "You want to sell the Chinese enough that their developers get addicted to the American technology stack, that's the thinking."

Sources told FT that senior Chinese leaders considered the statement "insulting," prompting regulators to pressure domestic tech companies such as Alibaba Group BABA and ByteDance to cut back or cancel orders of Nvidia's H20 processor, a downgraded chip approved for China.

Beijing's Push For Domestic Alternatives

The H20 chip was created after U.S. restrictions barred Nvidia from selling its most advanced GPUs in China.

While Chinese tech giants argued their AI projects could not progress without Nvidia's processors, regulators have been urging firms to adopt local alternatives from Huawei Technologies and Cambricon.

Some companies have begun using domestic chips for inference tasks — the process of running AI models — but still rely on Nvidia hardware for training due to performance gaps.

Previously, it was reported that Chinese startups like DeepSeek still rely on Nvidia. DeepSeek even had to delay its new AI model after Huawei's Ascend processors failed in training.

One insider told the publication, "Lutnick's speech gives the coalition [of regulators] one more reason to intensify its efforts to push tech firms to use China's own chips."

Nvidia's Position And Chinese Reaction

Following Lutnick's remarks, the CAC reportedly issued informal "window guidance" urging tech groups to halt new Nvidia orders.

The agency also summoned Nvidia executives over alleged "serious security issues," including claims the chips could be remotely shut down — an accusation Nvidia strongly disputed.

Despite the regulatory pressure, other Chinese ministries, such as commerce and foreign affairs, had welcomed Nvidia CEO Jensen Huang during his July visit.

Meanwhile, Nvidia responded to these concerns saying, "As both governments recognise, the H20 is not a military product or for government infrastructure … allowing U.S. chips for beneficial commercial business use is good for everyone."

What's Next For Nvidia In China

China accounted for about 13% of Nvidia's revenue in fiscal 2024, making it a critical market.

The company is now preparing to ship samples of a new "China Ready" Blackwell chip, the B30A, by September, which could offer better performance than the H20 while still complying with U.S. rules.

Price Action: Nvidia shares dipped 0.14% in Wednesday's regular session but recovered slightly, rising 0.23% in after-hours trading to $175.81 at the time of writing, according to Benzinga Pro.

Benzinga’s Edge Stock Rankings show NVDA continues to exhibit strong upward momentum across short, medium and long-term trends. Further performance insights are available here.

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