ByteDance, the parent company of TikTok, is reportedly in talks with Iluvatar CoreX and Baidu Inc. to acquire AI chips as it seeks to diversify its supply chain. The discussions come as Chinese tech firms increasingly turn to domestic suppliers amid U.S. export restrictions on advanced semiconductors. Iluvatar CoreX is projected to deliver at least 50,000 chips to ByteDance this year, primarily for AI inference tasks, to support the expanding user base of its Doubao chatbot.

If the deal materializes, Iluvatar CoreX would become ByteDance's third major domestic GPU supplier, joining Huawei and Cambricon. ByteDance is also evaluating Baidu's Kunlunxin chips, which are already utilized by Tencent Holdings. These potential partnerships underscore the growing capability of Chinese chipmakers to offer alternatives to foreign AI hardware, aligning with Beijing's strategic push for technological self-reliance.

Nvidia Adapts To China Curbs

The shift toward domestic suppliers follows a March report indicating ByteDance's plans for a major AI infrastructure expansion in Malaysia. That project reportedly involved deploying approximately 36,000 of Nvidia Corp.'s B200 AI chips through cloud provider Aolani Cloud, with hardware costs potentially exceeding $2.5 billion. Despite these overseas investments, Chinese GPU and AI chip manufacturers claimed nearly 41% of the domestic AI accelerator server market last year, challenging Nvidia's dominance in a region that previously generated over 20% of its data center revenue.

Nvidia CEO Jensen Huang acknowledged that China's AI chip industry, led by Huawei, has gained significant ground due to U.S. export restrictions. Huang stated that demand remains strong but admitted Nvidia has "largely conceded" the Chinese market because of these controls. In response, Nvidia has started marketing its new Vera AI data-center CPU to Chinese customers, with orders now open and availability expected as early as August. This chip marks Nvidia's first standalone CPU designed specifically for agentic AI workloads.

NVIDIA has informed Chinese clients that its new Vera central processors for AI data centers could be available as soon as August, allowing them to begin placing orders immediately, according to three sources familiar with the matter. This strategic pivot aims to revive the company's rapidly declining fortunes in China, a critical market where shipments of its second-most powerful AI chip, the H200, have stalled for months. The move highlights NVIDIA's urgency to diversify its offerings and maintain its market position amid regulatory and logistical hurdles affecting its high-end AI chip sales in the region.

The introduction of the Vera CPU marks a significant expansion of NVIDIA's product portfolio beyond its traditional graphics processing units. By targeting the data center segment, the company is directly challenging established players AMD and Intel in the central processing unit market. This escalation in rivalry comes at a time when NVIDIA is seeking alternative revenue streams to offset the impact of export restrictions and other barriers limiting its AI chip shipments to China.

Strategic Implications

The outreach to Chinese clients for the Vera processors underscores the importance of the Chinese market to NVIDIA's overall business strategy. With the H200 shipments facing prolonged delays, the company is leveraging its new CPU offerings to sustain engagement with key customers in the region. The availability of the Vera CPUs by August represents a critical timeline for NVIDIA to capture market share and mitigate the financial impact of stalled AI chip sales.

Competitive Landscape

NVIDIA's entry into the CPU market with the Vera processor intensifies the competition with AMD and Intel, both of which have a strong foothold in the data center and AI hardware sectors. The company's ability to quickly pivot and offer a new product line demonstrates its agility in responding to market challenges and regulatory pressures. However, the success of this strategy will depend on the performance and adoption of the Vera CPUs among Chinese clients, who have access to a range of alternatives from established competitors.

Market Reaction and Outlook

NVIDIA stock rose nearly 1% in Friday premarket trading as investors rotated back into large-cap technology stocks. The company continues to hold its long-term uptrend, trading 5.9% above its 100-day simple moving average of $194.57 and 9% above its 200-day SMA of $189.14. Analysts forecast earnings per share of $2.06, up from $1.04 a year earlier, on revenue of $91.70 billion versus $46.74 billion last year. The stock carries a consensus Buy rating with an average analyst price target of $323.83.