Nvidia to require full upfront payment from Chinese clients for H200 chips – report

The sources mentioned that Nvidia is requiring full upfront payment from Chinese customers who are seeking its H200 artificial intelligence chips, which is a rather unusual and stringent term compared to standard industry practice. This looks to be a move by Nvidia to hedge against the relative uncertainty of whether Beijing will approve of the shipments it would seem.

Besides requiring full upfront payment, Nvidia is also imposing terms of having no options for clients to cancel, ask for refunds or change configurations after the orders are placed. And in special circumstances, Nvidia might allow for customers to provide commercial insurance or asset collateral as an alternative to cash payment.

For some context, Chinese tech firms have reportedly placed over 2 million orders for H200 chips. That well exceeds the inventory of 700,000 of the chips. Despite Beijing wanting to force Chinese companies to rely more on homemade technology, it’s clear that China’s own developed AI processors are still lagging behind Nvidia especially for large-scale training of advanced AI models.

Adding to the report above, Beijing is said to have asked some Chinese tech firms to temporarily pause their H200 chip orders as regulators are trying to decide how many domestically produced chips each customer will be required to buy alongside each H200 chip order. In other words, Beijing is trying to balance things out in some convoluted way to force these companies to still find use or make do with China-made chips.

As for Nvidia itself, there’s good and bad to their decision here. On the one hand, they know that they have leverage to demand such terms. And the application helps to transfer the financial risk from Nvidia to its Chinese clients, in hopefully avoiding what happened with the incident involving H20 chips previously.

However, it is very much a balancing act. With Chinese clients already forced out by Beijing to seek domestic alternatives, Nvidia’s steep financial terms could very well accelerate the transition.