51% not Chinese: Nvidia's new rule for the clouds, given by word of mouth

Nvidia has told its cloud and data-centre partners that at least 51% of the services they sell on new contracts must go to companies that are not Chinese, the Financial Times reported on Tuesday, citing five people familiar with the matter¹. Existing agreements are untouched¹. The rule applies to partners worldwide, not only in Asia², and Nvidia had not imposed anything like it before¹.

The detail worth noticing is the form. The requirement was passed on verbally, by the sales force and regional teams, not in written documentation². Nvidia neither confirmed nor denied it when AFP asked¹. In a statement it said that “American chips are the foundation” that American model makers need to compete worldwide, and that US policy encourages cloud providers to build on American infrastructure².

The aim is plain enough. Many Chinese AI developers rent computing power from cloud providers outside China, and Washington has tried for years to close that route¹. Smuggling is the other route; earlier this year senior employees at the server maker Super Micro were charged over about $2.5bn of Nvidia servers sent to China¹.

The cost is plain too. A Singapore-based operator told the FT it is hard to find enough non-Chinese clients outside the US, and that strict enforcement could put its business at risk³. A share rule also needs someone to count: what is a “Chinese” customer, who checks, and what happens at 52%?

That is why you should want this written down. Export control works when it is boring: lists, licences, audits, a regulator who can be asked a question. A verbal quota from a supplier may be effective, but it can’t be checked, appealed or amended.