China learns to build without Nvidia

Hi, this is Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection — a succinct snapshot of what I’m seeing and hearing from local businesses.

China’s tech self-sufficiency push is rapidly becoming a reality as companies focus on business questions that run deeper than geopolitics. What does that mean for Nvidia?

Robovan startup Zelostech plans to use multiple chip suppliers from China and elsewhere, over the next year or two, instead of relying only on Nvidia for its self-driving systems, the company told CNBC.

A major factor is cost, said Shi Yunjian, director of finance and investment. Using China-made chips, for example, would cost far less than the two Nvidia Orin chipsets currently used in each vehicle, he said.

That’s a big deal because scale is becoming a competitive advantage. The more autonomous vehicles can deploy, the more operating data they can collect and the easier it becomes to convince regulators that the technology is ready for wider use.

Zelostech claims it already has more than 25,000 vehicles operating in over 20 countries, with plans to expand rapidly. These don’t carry people, and many are smaller than a mail truck. Most operate in mainland China, mostly for logistics companies delivering packages.

By comparison, Alphabet-backed Waymo has just under 4,000 vehicles on the road, while Chinese rivals Baidu, WeRide and Pony.ai have yet to deploy fleets at a similar scale.

Waymo uses custom chips, while Chinese electric car giant BYD last week joined Nio and Xpeng in revealing their own semiconductors for driver-assist systems.

This year, Nio said it’s planning a fivefold increase in spending on computing power. When I asked whether that included Nvidia, CEO William Li said the company was no longer buying chips but renting compute power powered by a variety of processors.

A vehicle Xpeng co-developed with Volkswagen is also using the Chinese company’s “Turing chip,” while the German automaker has partnered with China’s Horizon Robotics to develop driver-assist systems in China — without Nvidia.

Nvidia’s driver-assist chips are not subject to the same U.S. export restrictions that apply to the more advanced semiconductors used to train and run AI models.

Yet even after Nvidia CEO Jensen Huang joined U.S. President Donald Trump on his trip to Beijing in May, it’s clear China is not eager to let more Nvidia chips in.

The shift extends beyond vehicles. Chinese AI developers have increasingly optimized their models to run on homegrown hardware, rather than Nvidia’s widely used CUDA ecosystem.

The latest MiniMax and Kimi models, along with DeepSeek’s V4, are compatible with local Chinese semiconductors.

“We believe the pivot to domestic chips will accelerate over 2026E-28E,” Goldman Sachs analysts said in a May 5 report. They pointed out that DeepSeek V4 works with eight China-made chips, including those from Huawei and Alibaba‘s T-head chip unit.

Huawei last week also revealed that it’s been using a new scientific approach to developing its chips, and plans to incorporate them in upcoming products. It’s the latest sign of a comeback for the Chinese telecom giant, after years of U.S. restrictions.

Kevin Xu, founder of hedge fund Interconnected Capital, expects Chinese companies to continue to need Nvidia chips for the next three to five years.

But he argues Beijing has an incentive to limit that dependence sooner rather than later. China-made chips can only improve if companies use them in real-world scenarios, generating the feedback needed to make the technology useful for businesses.

“The more Nvidia chips get into the ecosystem, the more dilution you have of that relationship,” he said.

Nvidia’s revenue from mainland China and Hong Kong is shrinking anyway, even as the company doubles down on Taiwan with plans to spend as much as $150 billion a year there.

That investment will likely reverse Taiwan’s initial plan to limit AI data centers and nuclear power, said Chris Cottorone, president of TriOrient Investments and co-chair of the alternative assets committee at AmCham Taiwan. He also expects more local businesses to adopt AI.

Nvidia’s growing presence in Asia — but not in mainland China — is driving the chipmaker to find other ways to maintain technological leadership.

The U.S. company is trying to keep its foot in China’s world of “physical AI’ by collaborating with Chinese humanoid startup Unitree on a research robot sold globally. Huang also has an eye on talent as he’s reportedly joined a Tsinghua University board, which the company and school have yet to respond to requests for comment on.

It’s a sign that the tide is turning. China’s technological ambitions are no longer defined by access to Nvidia, but by the companies that can build without it.

Germany’s chief of defense General Carsten Breuer’s comments came after China’s defense minister Dong Jun skipped the conference for a second straight year, with Beijing sending a lower-level delegation.

China industrial profits jump 24.7% in April, fastest gain in over two years despite headwinds

For the first four months of the year, industrial profits rose 18.2%, up from 15.5% growth in the first quarter. Computing and electronics equipment manufacturing, the largest sector by profit amount, saw earnings more than double from a year ago.

European companies double down on China manufacturing despite EU de-risking push

More European companies are maintaining or expanding their supply chains in mainland China to remain competitive globally, according to a survey released Wednesday by the European Union Chamber of Commerce in China.

May 31 – June 2: Brazil Foreign Minister Mauro Vieira to visit China

June 1 – 3: UK Foreign Secretary Yvette Cooper to visit China for 11th bilateral strategic dialogue

June 3: RatingDog China Services PMI (May)

June 9: Trade data for May