Renting Nvidia AI chips in China is cheaper than in the US

The cost of renting cloud services powered by Nvidia’s cutting-edge AI chips is lower in China than in the U.S., a sign that advanced processors are easily reaching the Chinese market despite Washington’s export restrictions.

Four small Chinese cloud providers are charging local tech groups about $6 an hour to use a server with eight Nvidia A100 processors in a base configuration, companies and customers told the Financial Times. Small cloud providers in the U.S. are charging about $10 an hour for the same configuration.

Those in the AI and cloud services industries say the low prices are a sign of ample supply of Nvidia chips in China and a way to circumvent U.S. measures aimed at preventing access to cutting-edge technology.

The A100 and H100, which are also readily available, are among Nvidia’s most powerful AI accelerators and are used to train large language models that power AI applications. The Silicon Valley company has been banned from shipping the A100 to China since fall 2022 and has never been allowed to sell the H100 in the country.

Chip vendors and tech startups say the products are relatively easy to get their hands on. Stocks of the A100 and H100 are openly advertised for sale on Chinese social media and e-commerce sites like Xiaohongshu and Alibaba’s Taobao, as well as on e-markets, at small markups over overseas prices.

China’s largest cloud service providers, such as Alibaba and ByteDance, known for their reliability and security, charge two to four times more for similar Nvidia A100 servers than smaller local providers, according to prices quoted by both operators and customers.

After the discounts, both Chinese tech giants are offering packages at prices comparable to Amazon Web Services, which charges between $15 and $32 an hour. Alibaba and ByteDance did not respond to requests for comment.

“Big players have to think about compliance, so they are at a disadvantage. They don’t want to use smuggled chips,” the startup’s Chinese founder said. “Smaller suppliers are less concerned.”

He estimated that there are more than 100,000 Nvidia H100 processors in the country, based on their widespread availability on the market. Nvidia chips are about the size of a book, making them relatively easy for smugglers to transport across borders, undermining Washington’s efforts to curtail China’s advances in artificial intelligence.

“We bought our H100s from a company that smuggled them out of Japan,” said the founder of an automation startup who paid about 500,000 yuan ($70,000) for two cards this year. “They etched the serial numbers.”

Nvidia said it sold its processors “primarily to well-known partners who work with us to ensure that all sales comply with U.S. export control laws.”

“Our used products are available through many second-hand channels,” the company added. “While we cannot track products once they are sold, if we find that a customer is violating U.S. export controls, we will take appropriate action.”

The head of a small Chinese cloud provider said low domestic costs helped offset the higher prices suppliers were paying for smuggled Nvidia processors. “Engineers are cheap, power is cheap and competition is fierce,” he said.

At Shenzhen’s Huaqiangbei electronics market, vendors who spoke to the FT quoted the equivalent of $23,000-$30,000 for Nvidia H100 plug-in cards. Online vendors quote the equivalent of $31,000-$33,000.

Nvidia is charging customers $20,000-$23,000 for the H100 chips after a recent price cut, according to Dylan Patel of SemiAnalysis.

One Chinese data center supplier said servers made by Silicon Valley-based Supermicro and equipped with eight H100 chips hit a peak selling price of 3.2 million yuan after the Biden administration tightened export curbs in October. It said prices have since fallen to 2.5 million yuan as supply constraints eased.

Several people involved in the trade said buyers from Malaysia, Japan and Indonesia often shipped Supermicro servers or Nvidia processors to Hong Kong before driving them across the border to Shenzhen.

Experts say the black market trade relies on difficult-to-circumvent ways to circumvent Washington’s export rules.

For example, while subsidiaries of Chinese companies are barred from purchasing advanced AI chips outside the country, their executives can set up new companies in countries like Japan or Malaysia to make those purchases.

“It’s hard to fully enforce export controls outside the U.S.,” said a U.S. sanctions expert. “That’s why the regulations require the carrier to investigate end users, and the (Commerce Department) adds companies that are believed to be violating the regulations to the (prohibited) entity list.”

Additional information was provided by Michael Acton in San Francisco.