China Bans Foreign AI Chips in State-Funded Data

China has reportedly imposed a new rule banning the use of foreign-made artificial intelligence (AI) chips in state-funded data centres, signaling a major escalation in its push for technological independence. According to industry sources, the Chinese government has instructed that all publicly financed or government-backed AI data centre projects must use domestically manufactured chips moving forward.

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This directive applies to both new projects and those already under construction, marking one of Beijing’s most assertive efforts yet to reduce reliance on U.S. semiconductor technology.
The new policy reportedly impacts projects that are less than 30% completed, which must immediately switch to local alternatives, while ongoing developments nearing completion will be evaluated individually. This move follows tightening U.S. export restrictions on advanced semiconductors used for AI, effectively cutting off Chinese firms from Nvidia’s high-end GPUs — the backbone of global AI training and data processing. In response, Beijing appears determined to accelerate homegrown innovation, prioritizing Chinese chipmakers like Huawei, Cambricon, and Biren Technology.
Industry analysts view the decision as both a strategic and symbolic step. Strategically, it strengthens China’s domestic semiconductor supply chain and shields its AI ecosystem from geopolitical risks. Symbolically, it demonstrates Beijing’s commitment to achieving “tech sovereignty,” reducing the dependency on Western technology that has long been a vulnerability for its AI ambitions.
For U.S. chipmakers such as Nvidia, AMD, and Intel, the ban represents a significant market setback. China has been one of their largest customers for AI-related chips, accounting for billions of dollars in annual sales. Nvidia, in particular, has recently faced mounting pressure in the region, with reports suggesting its market share in Chinese government projects has dropped to nearly zero due to the new restrictions.
On the domestic front, Chinese companies stand to benefit immensely. Local chipmakers are expected to receive substantial state support to scale production and meet performance standards that can rival foreign competitors. However, the transition will not be without challenges. Many Chinese AI chips still lag behind global leaders in efficiency and compatibility with existing software frameworks. This gap may temporarily slow down some AI data centre developments while domestic technologies catch up.
Overall, this latest policy underscores the growing technological divide between China and the West. As AI becomes the backbone of global innovation, the competition over chip dominance is evolving into a full-scale geopolitical battle — one that will shape the future of computing, trade, and national security for years to come.

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