(Bloomberg) -- Chinese AI developers expect to receive just a small fraction of the advanced Nvidia Corp. ( NVDA ) chips they've ordered over the next several months, as the US company struggles to boost production to meet soaring demand.
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Alibaba Group Holding Ltd., Tencent Holdings Ltd., ByteDance Ltd. and other Chinese AI and cloud firms have in total ordered about 6 million of Nvidia's RTX Pro 5500 chips, according to people familiar with the matter. Yet the companies predict they will get only some tens of thousands, or roughly 1%, within the next four months, said the people, asking not to be named discussing a private matter.
At more than $11,000 a chip, the total orders so far are valued at about $70 billion, the people said.
This price reflects trading activity during the overnight session on the Blue Ocean ATS, available 8 PM to 4 AM ET, Sunday through Thursday, when regular markets are closed.
Chinese hyperscalers' strong appetite for the chips underscores the enormous shortage of AI computing power in the country. It also exposes the limitations of local hardware manufacturers despite the technological progress they've been making. Scant chip supply will make it harder for the Chinese AI developers to catch up with the US market leaders.
While the US bars Nvidia from selling its most cutting-edge chips to China, the RTX Pro 5500 isn't quite powerful enough to face such restrictions. Yet in China, it is among the best AI chips available, as local manufacturers Huawei Technologies Co. and Alibaba's T-Head trail the production and technological capabilities of their US rivals.
Nvidia, the global AI hardware leader, has lobbied the US government for years to be able to sell more chips to Chinese customers. Yet with insufficient global production capacity, the US company is prioritizing its most sophisticated and higher-margin semiconductors, used by the likes of OpenAI and Anthropic PBC.
Nvidia's Chips in China
Major Chinese AI developers expect the first batch of several thousand RTX Pro 5500 chips to be delivered by the end of this year, followed by another batch of tens of thousands around February, said the people. Those are the only confirmed shipments so far, one of the people said.
The Chinese hyperscalers estimate they could receive roughly 700,000 RTX Pro 5500 units by the end of 2027, as Nvidia is expected to ramp up production, said one of the people, citing internal calculations of a key buyer. The final shipment sizes could change, depending on Nvidia's capacity adjustments.
"Unfortunately, US firms continue to be restricted by a combination of outdated US export controls, which cover gaming products released nearly a half a decade ago, and China's own limits on US imports," an Nvidia spokesperson said in a response to questions, declining to comment on shipment numbers.
Alibaba, Tencent and ByteDance spokespersons didn't respond to requests for comment.
Nvidia has warned customers of limited capacity for the foreseeable future, citing product scheduling conflicts, said the people. The Santa Clara, California-based company relies on Taiwan Semiconductor Manufacturing Co. to produce its AI chips. With Nvidia and TSMC allocating more of their manufacturing capacity toward next-generation products such as Rubin, supply of the RTX Pro 5500 is expected to remain constrained.
Washington bars Nvidia's most powerful accelerators from China on concerns they would propel the country's AI efforts and aid the military of a geopolitical ally. Still, the Trump administration recently lifted restrictions on some older-generation chips that have been sold in small quantities.
The Chinese government has signaled it may allow companies such as Alibaba and ByteDance to buy RTX Pro 5500 chips, The Information reported in September. Reuters reported last month that Nvidia orders by the Chinese firms had topped 3 million units.
Given Nvidia's tight supply, Chinese hyperscalers are likely to keep turning to domestic alternatives such as Huawei, Cambricon Technologies Corp. and Alibaba's T-Head for inference chips. But US restrictions on advanced chipmaking equipment and services, along with a prolonged shortage of high-bandwidth memory, continue to constrain Chinese chipmakers' production capacity and drive up prices.
For one, Cambricon's latest results highlighted its production constraints. Huawei, China's largest AI chip supplier, also lifted the prices for its most advanced accelerators by 60% around September.
--With assistance from Ian King, Luz Ding and Zheping Huang.
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