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On Wednesday, China approved imports of Nvidia’s H200 artificial intelligence chips for three of its largest technology companies, Reuters reported. ByteDance, Alibaba, and Tencent received approval to purchase more than 400,000 H200 chips in total, marking a shift in Beijing’s stance after weeks of holding up shipments despite US export clearance.

The move follows Beijing’s temporary halt to H200 shipments earlier this month after Washington cleared exports on January 13. Chinese customs authorities had told agents that the H200 chips were not permitted to enter China, Reuters reported earlier this month, even as Chinese technology companies placed orders for more than two million of the chips.

The H200, Nvidia’s second most powerful AI chip after the B200, delivers roughly six times the performance of the company’s H20 chip, which was previously the most capable chip Nvidia could sell to China. While Chinese companies such as Huawei now have products that rival the H20’s performance, they still lag far behind the H200.

Chinese tech giants want access to Nvidia’s higher-powered AI chips because they dramatically speed up the process of training large AI models, a computationally intensive task of feeding data through neural networks millions of times to tune their performance. More capable chips like the H200 allow companies to train larger models faster or run more AI queries (called inference) at a lower cost.

This has made high-end AI accelerator chips a flashpoint in the ongoing AI race between Washington, DC, and Beijing, with US policymakers caught between wanting to boost sales for American semiconductor companies and fearing that exports could help China close the gap in AI capabilities.

Still, Nvidia wants the business because China is a huge market. The latest approvals came during Nvidia CEO Jensen Huang’s visit to China this week, according to sources who spoke with Reuters on the condition of anonymity. Other Chinese firms are now waiting for their own approvals in future rounds, though Beijing is attaching conditions to the licenses that have not yet been finalized. One source told Reuters that the license terms were too restrictive and buyers had not yet turned their approvals into actual orders.

Beijing’s balancing act

The approval signals Beijing’s prioritization of its major Internet companies, which are spending billions of dollars to build data centers needed to develop AI services and compete with US rivals, including OpenAI. But regulators are also trying to nurture China’s domestic semiconductor industry, the South China Morning Post reported.

The first batch was expected to go to Big Tech companies in urgent need of the GPU, according to a source who spoke with that publication. However, access for state-backed firms, including telecom operators, was expected to stay tightly restricted.

Beijing has previously discouraged domestic technology companies from purchasing foreign chips unless absolutely needed, according to earlier Reuters reporting. One proposal authorities discussed in the past would require each H200 purchase to be bundled with a set ratio of domestic chips.

“Beijing’s approval of the H200 is driven by purely strategic motives,” Alex Capri, a senior lecturer at the National University of Singapore’s business school, told the South China Morning Post. “Ultimately, this decision is taken to further China’s indigenous capabilities and, by extension, the competitive capabilities of China tech.”