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The flags of China and the USA are being displayed on a smartphone, with an NVIDIA chip visible in the background. 

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Chinese companies are ramping up efforts to produce a viable alternative to Nvidia’s chips that power artificial intelligence as Beijing continues its efforts to wean itself off American technology.

U.S. sanctions slapped on China over the past few years, along with Nvidia‘s dominance in the space, have provided big challenges for Bejing’s efforts, at least in the short term, analysts told CNBC.

Nvidia’s well-documented boom has been driven by large cloud computing players buying its server products which contain its graphics processing units, or GPUs. These chips are enabling companies, such as ChatGPT maker OpenAI, to train their huge AI models on massive amounts of data.

These AI models are fundamental to applications like chatbots and other emerging AI applications.

The U.S. government has restricted the export of Nvidia’s most advanced chips to China since 2022, with restrictions tightening last year.

Such semiconductors are key to China’s ambitions to become a leading AI player.

CNBC spoke to analysts who identified some of China’s leading contenders that are looking to challenge Nvidia, including technology giants Huawei, Alibaba and Baidu and startups such as Biren Technology and Enflame.

The overarching view is that they are lagging behind Nvidia at this point.

“These companies have made notable progress in developing AI chips tailored to specific applications (ASICs),” Wei Sun, a senior analyst at Counterpoint Research, told CNBC.

“However, competing with Nvidia still presents substantial challenges in technological gaps, especially in general-purpose GPU. Matching Nvidia in short-term is unlikely.”

China’s key challenges

Chinese firms have a “lack of technology expertise”, according to Sun, highlighting one of the challenges.

However, it’s the U.S. sanctions and their knock-on effects that pose the biggest roadblocks to China’s ambitions.

Some of China’s leading Nvidia challengers have been placed on the U.S. Entity List, a blacklist which restricts their access to American technology. Meanwhile, a number of U.S. curbs have restricted key AI-related semiconductors and machinery from being exported to China.

China’s GPU players all design chips and rely on a manufacturing company to produce their chips. For a while, this would have been Taiwan Semiconductor Manufacturing Co., or TSMC. But U.S. restrictions mean many of these firms cannot access the chips made by TSMC.

They therefore have to turn to SMIC, China’s biggest chipmaker, whose technology remains generations behind TSMC. Part of the reason why it’s lagging behind, is because Washington has restricted SMIC’s access to a key piece of machinery from Dutch firm ASML, which is required to manufacture the most advance chips.

Meanwhile, Huawei has been pushing development of more advanced chips for its smartphones and AI chips, which is taking up capacity at SMIC, according to Paul Triolo, a partner at consulting firm Albright Stonebridge.

“The key bottleneck will be domestic foundry leader SMIC, which will have a complex problem of dividing limited resources for its advanced node production between Huawei, which is taking up the lion’s share currently, the GPU startups, and many other Chinese design firms which have been or may be cutoff from using global foundry leader TSMC to manufacture their advanced designs,” Triolo told CNBC.

Nvidia is more than just GPUs

Nvidia has found success due to its advanced semiconductors, but also with its CUDA software platform that allows developers to create applications to run on the U.S. chipmaker’s hardware. This has led to the development of a so-called ecosystem around Nvidia’s products that others might find hard to replicate.

“This is the key, it is not just about the hardware, but about the overall ecosystem, tools for developers, and the ability to continue to evolve this ecosystem going forward as the technology advances,” Triolo said.

Huawei leading the pack

U.S. export controls on Chinese firms could 'get even worse' if Trump is re-elected: Analyst

In the area of software and building a developer community, Huawei “holds lots of advantages,” Triolo said. But it faces similar challenges to the rest of the industry in trying to compete with Nvidia.

“The GPU software support ecosystem is much more entrenched around Nvidia and to a lesser degree AMD, and Huawei faces major challenges, both in producing sufficient quantities of advanced GPUs such as part of the Ascend 910C, and continuing to innovate and improve the performance of the hardware, given U.S. export controls that are limiting the ability of SMIC to produce advanced semiconductors,” Triolo said.

Chip IPOs ahead?

The challenges facing China’s Nvidia competitors have been evident over the past two years. In 2022, Biren Technology carried out a round of layoffs, followed by Moore Threads the year after, with both companies blaming U.S. sanctions.

But startups are still holding out hope, looking to raise money to fund their goals. Bloomberg reported last week that Enflame and Biren are both looking to go public to raise money.

“Biren and the other GPU startups are staffed with experienced industry personnel from Nvidia, AMD, and other leading western semiconductor companies, but they have the additional challenge of lacking the financial depth that Huawei has,” Triolo said.

“Hence both Biren and Enflame are seeking IPOs in Hong Kong, to raise funding for additional hiring and expansion.”

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Amazon to invest another $4 billion in Anthropic, OpenAI’s biggest rival

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Amazon to invest another  billion in Anthropic, OpenAI's biggest rival

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Amazon on Friday announced it would invest an additional $4 billion in Anthropic, the artificial intelligence startup founded by ex-OpenAI research executives.

The new funding brings the tech giant’s total investment to $8 billion, though Amazon will retain its position as a minority investor, according to Anthropic, the San Francisco-based company behind the Claude chatbot and AI model.

Amazon Web Services will also become Anthropic’s “primary cloud and training partner,” according to a blog post. From now on, Anthropic will use AWS Trainium and Inferentia chips to train and deploy its largest AI models.

Anthropic is the company behind Claude — one of the chatbots that, like OpenAI’s ChatGPT and Google’s Gemini, has exploded in popularity. Startups like Anthropic and OpenAI, alongside tech giants such as GoogleAmazonMicrosoft and Meta, are all part of a generative AI arms race to ensure they don’t fall behind in a market predicted to top $1 trillion in revenue within a decade. Some, like Microsoft and Amazon, are backing generative AI startups with hefty investments as well as working on in-house generative AI.

The partnership announced Friday will also allow AWS customers “early access” to an Anthropic feature: the ability for an AWS customer to do fine-tuning with their own data on Anthropic’s Claude. It’s a unique benefit for AWS customers, according to a company blog post.

In March, Amazon’s $2.75 billion investment in Anthropic was the company’s largest outside investment in its three-decade history. The companies announced an initial $1.25 billion investment in September 2023.

Amazon does not have a seat on Anthropic’s board.

News of Amazon’s additional investment comes one month after Anthropic announced a significant milestone for the company: AI agents that can use a computer to complete complex tasks like a human would.

Anthropic’s new Computer Use capability, part of its two newest AI models, allows its tech to interpret what’s on a computer screen, select buttons, enter text, navigate websites and execute tasks through any software and real-time internet browsing.

The tool can “use computers in basically the same way that we do,” Jared Kaplan, Anthropic’s chief science officer, told CNBC in an interview last month, adding it can do tasks with “tens or even hundreds of steps.”

Amazon had early access to the tool, Anthropic told CNBC at the time, and early customers and beta testers included Asana, Canva and Notion. The company had been working on the tool since early this year, according to Kaplan.

In September, Anthropic rolled out Claude Enterprise, its biggest new product since its chatbot’s debut, designed for businesses looking to integrate Anthropic’s AI. In June, the company debuted its more powerful AI model, Claude 3.5 Sonnet, and in May, it rolled out its “Team” plan for smaller businesses.

Last year, Google committed to invest $2 billion in Anthropic, after previously confirming it had taken a 10% stake in the startup alongside a large cloud contract between the two companies.

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Apple and Google could face a competition probe over their huge mobile ecosystems in the UK

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Apple and Google could face a competition probe over their huge mobile ecosystems in the UK

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LONDON — Apple and Google could face a competition investigation into their dominance of mobile web browsers and apps in the U.K.

The U.K.’s Competition and Markets Authority issued a report Friday with a provisional decision from an independent inquiry group tasked by the regulator with carrying out an in-depth review of the mobile browser markets.

In the report, the group recommended that the CMA investigates Apple and Google’s activities in mobile ecosystems under the new Digital Markets, Competition and Consumers Act (DMCC), a new U.K. law coming into force next year which seeks to prevent anti-competitive behavior in digital markets.

The DMCC is akin to the Digital Markets Act in the European Union. It gives the CMA the ability to designate firms as having “Strategic Market Status” (SMS) — which means they have a significant amount of market power in a certain digital business.

Under the rules, the CMA can impose major behavioral changes on firms that have SMS status, including ending “self-preferencing” of their own services, requiring interoperability — essentially allowing one piece of software to work with another smoothly — and banning anti-competitive behavior.

The CMA is required to undertake a formal investigation to give a firm SMS status.

For Apple specifically, the CMA inquiry group said it was concerned the tech giant’s App Store rules “restrict other competitors from being able to deliver new, innovative features that could benefit consumers” — for example, faster webpage loading on iPhone apps.

It added many smaller U.K. developers said they would like to use “progressive” web apps — which allow firms to offer apps outside of an app store — but that this technology “is not able to fully take off on iOS devices.”

The group also said it found a revenue-sharing agreement between Google and Apple to make Google the default search engine on iPhone “significantly reduces their financial incentives to compete in mobile browsers on iOS.”

“Markets work best when rival businesses are able to develop and bring innovative options to consumers,” Margot Daly, chair of the CMA’s independent inquiry group, said in a statement, adding that “competition between different mobile browsers is not working well and this is holding back innovation in the U.K.”

Apple said in a statement that it disagreed with the findings of the report and that it was concerned market interventions imposed under the DMCC “would undermine user privacy and hinder our ability to make the kind of technology that sets Apple apart.”

 “Apple believes in thriving and dynamic markets where innovation can flourish. We face competition in every segment and jurisdiction where we operate, and our focus is always the trust of our users” an Apple spokesperson told CNBC via email.

Google was not immediately available for comment when contacted by CNBC.

The CMA group had also looked into restrictions on the distribution of gaming services on Apple’s mobile app distribution platform. However, it’s now decided to drop this element of the investigation following a decision by the U.S. tech giant to allow cloud gaming services on App Store.

The regulator said interested parties have until Dec. 13 to share comments on its provisional findings. It expects to make a final decision in March 2025.

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Indonesia wants Apple to sweeten its $100 million proposal as tech giant lobbies for iPhone 16 sales

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Indonesia wants Apple to sweeten its 0 million proposal as tech giant lobbies for iPhone 16 sales

An iPhone 16 signage is seen on the window at the Fifth Avenue Apple Store on new products launch day on September 20, 2024 in New York City. 

Michael M. Santiago | Getty Images News | Getty Images

The Indonesian government expects Apple to increase its proposed $100 million investment into the country, according to state media, as the iPhone maker seeks clearance from Jakarta to sell its latest phones.

The American tech giant’s latest smartphone model doesn’t meet Indonesia’s 40% domestic content requirements for smartphones and tablets and hasn’t been granted clearance to be sold in the country. 

The purpose of the ban is to protect local industry and jobs, with officials asking Apple to increase its investments and commitments to the economy in order to gain greater access. 

According to a report from Indonesian state media, the country’s Ministry of Industry met with representatives from Apple on Thursday regarding its proposal to invest $100 million over two years. 

The funds would go toward a research and development center program and professional development academy in the country, as per the report.

The company also plans to produce accessory product components, specifically mesh for Apple’s AirPods Max, starting in July 2025, it added.

Apple didn’t immediately respond to a request for comment from CNBC.

While the new offer is 10 times larger than a proposal that was reported earlier, the government is still striving to sweeten the deal to get a “fair” commitment.

“From the government’s perspective, of course, we want this investment to be larger,” industry ministry spokesperson Febri Hendri Antoni Arif told state media on Thursday.

He said that a larger investment would help the development of Indonesia’s manufacturing sector, adding that its domestic industry was capable of supporting production of Apple devices such as chargers and accessories.

While Indonesia represents a small market for Apple, it also offers growth opportunities as it has the world’s fourth-largest population, according to Le Xuan Chiew, a Canalys analyst focusing on Apple strategy research.

“Its young, tech-savvy population with growing digital literacy aligns with Apple’s strategy to expand [global sales],” he said, noting that it also offers potential for manufacturing and assembly that supports Apple’s efforts to diversify its supply chain. 

Success in this market requires a long-term approach, and Apple’s investment offer demonstrates a commitment to complying with local regulations and paving the way for future growth, he added.

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