Nvidia is reportedly modifying its H20 artificial intelligence (AI) chip, its most powerful GPU for the Chinese market, to comply with recent U.S. export restrictions. The company plans to launch a less powerful version of the chip in China within the next two months, after the original H20 model's sales were effectively blocked.

According to Reuters, the updated chip will have significantly reduced memory capacity compared to the original H20, based on revised technical thresholds set by Nvidia. Sources suggest that downstream customers may be able to modify the chip's module configuration to adjust performance levels.

Nvidia aims to release the downgraded H20 in July and has informed major Chinese customers, including leading cloud computing providers, about the plans. China is a critical market for Nvidia, accounting for 13% ($17 billion) of its total sales in the fiscal year ending January 26. The company faces increasing U.S. efforts to limit China's access to advanced semiconductor technology due to concerns about potential military applications.

The original H20 chip was designed to comply with October 2023 controls and was the most powerful AI chip cleared for Chinese sales. However, U.S. officials recently informed Nvidia that the H20 would now require an export license, effectively halting its availability. CEO Jensen Huang visited Beijing in April, emphasizing the market's importance to the company.

Chinese tech giants like Tencent, Alibaba, and ByteDance had shown strong interest in the H20 chip, with reported orders valued at $18 billion by last month.