Nvidia Headquarters
Nvidia is facing mounting hurdles in China.

Nvidia's dominance in China's artificial intelligence (AI) market is under pressure from two fronts: a Chinese antitrust investigation and ongoing US export restrictions.

The squeeze is forcing Chinese firms to explore domestic alternatives, creating openings for local chipmakers, suppliers, and system builders—but the road to independence remains steep.

China's Antitrust Probe Targets Nvidia

On 15 September, China's State Administration for Market Regulation (SAMR) said a preliminary probe found that Nvidia had violated the country's anti-monopoly law over its 2020 acquisition of Mellanox.

Regulators are considering fines or restrictions, according to the Financial Times, a move that could complicate Nvidia's position in the world's largest AI market.

US Export Controls Tighten Supply

Washington has already curbed exports of Nvidia's most advanced AI processors and manufacturing equipment. While some export licences are still granted, the toughest restrictions remain, reports Bloomberg.

The combined effect of US limits and Chinese scrutiny is weakening Nvidia's grip on China's AI ecosystem, Business Insider noted.

Domestic Startups Gain Momentum

Chinese chipmakers, including Cambricon Technologies, Biren Technology, and Moore Threads, are racing to capture demand from data centres and cloud providers.

Funding and engineering expertise are increasingly shifting towards these firms under Beijing's strategy to reduce reliance on US technology, reported Rest of World.

Supply Chain Expansion Underway

The opportunity extends beyond chip designers. Suppliers specialising in packaging, testing, and memory are expected to scale up, according to Nikkei Asia.

Taiwan's TSMC, still the global foundry leader, may face greater competition from Chinese firms that are prioritised for local orders.

Equipment makers such as Naura Technology could also benefit as demand rises.

System Builders See Openings

Nvidia's Mellanox networking gear has long been vital for AI clusters. If restrictions bite deeper, Chinese system vendors may integrate local accelerators into their designs, reports Reuters.

This shift could create markets for firms providing cooling technologies, orchestration software, and cluster optimisation tools.

Obstacles to Full Independence

Despite momentum, experts caution that Chinese firms face significant barriers.

Bloomberg highlighted that they lack access to extreme ultraviolet lithography and other advanced tools essential for cutting-edge chipmaking.

Nikkei Asia added that heavy dependence on foreign technology makes rapid self-sufficiency unlikely.

A Fragmented Market Ahead

Industry analysts foresee a split market rather than Nvidia's complete exit.

Rest of World reported that Chinese cloud providers are scaling back Nvidia orders while investing in domestic accelerators and proprietary software optimisations.

This trend may strengthen local players but risks creating compatibility challenges for global developers.

Outlook: Policy Will Decide Winners

The outcome hinges on government action. The Financial Times suggested that China's probe into Nvidia could mark a turning point, while Bloomberg stressed that Washington's export policy will remain a critical factor.

Industry watchers are also monitoring whether China's largest cloud firms commit publicly to domestic accelerator roadmaps, a step that could turn short-term opportunities into lasting gains for Nvidia's rivals.

Originally published on IBTimes UK