Nvidia tells cloud clients to sell at least 51% of services to non-Chinese firms

The instruction represents a significant compliance measure during a broader crackdown on chip diversion. It establishes a majority rule targeting businesses that rent out Nvidia's hardware, reflecting mounting pressure from Washington to prevent advanced AI chips from reaching Chinese entities through indirect channels.

The 51% threshold specifically addresses a gap in export controls where chips remain physically outside China while their computing power is accessed by Chinese firms over the internet. This limits how much capacity can flow to Chinese customers through such arrangements.

Enhanced Compliance Measures

This latest move follows several steps Nvidia has taken to tighten oversight of Asian customers. In July 2026, the company reduced its list of approved Asian clients by more than 50%, particularly affecting neocloud providers in Singapore, Malaysia, and Japan that specialize in renting GPU computing power for AI workloads.

Nvidia's enhanced compliance procedures now include physical inspections of data centers, contract verifications to confirm end customers, and interviews with hardware end users. These measures implement guidance from the US Commerce Department issued in May 2026 to prevent diversion of advanced technology like Nvidia's Blackwell-series processors to Chinese intermediaries.

Chinese Workarounds

Since US export controls on advanced chips began tightening in 2022, Chinese firms have sought alternative routes to Nvidia's computing power. One method involves overseas data centers, with Chinese tech giants reportedly obtaining hardware through legally compliant arrangements in countries like Japan and Australia.

Industry Implications

For neocloud operators in Asia, providers with predominantly Chinese client bases now face a choice: rebalance toward non-Chinese customers or risk losing access to Nvidia hardware. The new inspection regime also adds operational friction through site visits, contract reviews, and end-user interviews.

Chinese tech firms may face prolonged limited access to advanced AI technology, potentially affecting their operational capabilities and growth prospects, especially for companies developing large AI models dependent on cutting-edge computing power. Nvidia has also modified its revenue reporting for fiscal 2026 to better reflect customer locations.