Beijing has intensified efforts to encourage Chinese companies to buy domestically produced artificial intelligence (AI) chips, instead of acquiring them from Nvidia Corp.

This initiative aims to strengthen China’s semiconductor industry and address ongoing American sanctions that limit advanced chip sales to China.

Chinese regulators have advised local companies to avoid purchasing Nvidia’s H20 chips, which are essential for AI development.

While this directive is not a formal ban, Beijing indicates intent to support local AI startups as it prepares technology firms for potential restrictions from Washington.

Following reports of this policy shift, Nvidia’s stock fell by 3.9% on Friday to US$119.26, despite a more than 100% increase in value this year.