China fears Nvidia has exploited its AI chips for espionage.

The survival of Nvidia 's lucrative business in China thanks to the sale of its H20 AI chips may be hanging by a thread. The Cyberspace Administration of China (CAC), the country's internet regulator, summoned representatives of the tech giant led by Jensen Huang on Thursday to address "serious security issues" related to its technology. Beijing believes it could be used for espionage by the United States .

"US artificial intelligence experts have revealed that Nvidia's computer chips feature advanced tracking, localization, and remote shutdown technologies ," the CAC stated in a statement released this morning. It also noted that "US lawmakers required advanced chips exported from the US to be equipped with tracking and localization capabilities," something Senator Tom Cotton effectively requested to curb Chinese access to advanced US semiconductor technology.

Finally, the institution emphasizes that "to safeguard the security of the network and the data of Chinese users," it is necessary for the North American technology company to "explain the security risks" of its chips and "present the relevant supporting documentation."

The clash between China and Nvidia comes weeks after Washington lifted its ban on the firm continuing to sell its H20 chips to Chinese companies. The company developed this less advanced model specifically for the Chinese market after the United States imposed export restrictions on its advanced AI chips at the end of 2023.

Nvidia's products are in high demand not only from Chinese technology companies, but also from military agencies, state AI research institutes, and Chinese universities. Last week, the company ordered 300,000 H20 chipsets from manufacturer TSMC due to strong demand, Reuters reports.

Chinese authorities and industry associations have previously accused US technology companies of posing security risks, with varying consequences. In early 2023, China banned key operators of the country's infrastructure from purchasing from chip company Micron after allegedly finding that the US manufacturer's products posed serious security risks.