China Challenges Nvidia’s Dominance with Subsidies for Local AI Chips

China is escalating its efforts to reduce reliance on U.S. technology by offering substantial power cost reductions for data centers using domestically produced AI chips. Provinces such as Gansu, Guizhou, and Inner Mongolia are providing subsidies that slash electricity bills by up to 50%, targeting companies like Alibaba, Tencent, and ByteDance, which have voiced concerns over high operational costs.

Local chips from Huawei and Cambricon, though less energy-efficient than Nvidia's H20 GPUs, stand to benefit from these measures. With electricity prices in inland regions already 30% lower than coastal cities, the new subsidies could drive rates down to RMB 0.4 (5.6 cents) per kWh—significantly undercutting U.S. power costs.

The policy underscores Beijing's strategic push to retain AI projects within its borders amid tightening U.S. export controls. Regional governments are further incentivizing investments with cash support and operational cost coverage, intensifying competition for data center deployments.