China seeks a homegrown alternative to Nvidia — these are some of the companies to watch

U.S. sanctions over the years on China’s semiconductor industry has forced Beijing to ramp up efforts to boost its domestic chip sector.

The boom of artificial intelligence and foundational models has only spurred on China’s goal of playing a leading role in the chip industry.

So far, it is American firm Nvidia with its graphics processing units, or GPUs, that has garnered the headlines, as it designs the key piece of hardware required to train up huge AI models, such as the likes seen from OpenAI that underpins ChatGPT.

While Nvidia can ship certain chips to China, Washington has shown its willingness to cut its tech rival off from the most cutting-edge semiconductors and tools needed to make them. This has renewed focus on China’s homegrown efforts to rival Nvidia and create semiconductors that can underpin the world’s second-largest economy’s own AI industry.

CNBC spoke to two analysts who identified some of the leading Chinese competitors to Nvidia.

The firm’s current generation of chip is called the Ascend 910B, and the company is gearing up to launch the Ascend 910C, which could be on par with Nvidia’s H100 product, according to a Wall Street Journal report in August.

In its annual report earlier this year, Nvidia explicitly identified Huawei, among other companies, as a competitor in areas such as chips, software for AI and networking products.

“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. Here, Huawei holds a lot of advantages, and is attempting to build a software ecosystem around its Ascend series of datacenter processors,” Paul Triolo, an associate partner at consulting firm Albright Stonebridge, told CNBC.

Alibaba and Baidu both buy Nvidia chips but they are also designing their own semiconductors for AI processes.

Baidu, one of China’s biggest internet companies, designs its own chips for the use in servers and autonomous cars under the brand name Kunlun.

Alibaba’s semiconductor design unit called T-Head, has developed an AI inference chip called the Hanguang 800. Inference is the process that follows the training of AI models, as it refers to the actual application of AI in the real world, such as a chatbot responding to user queries.

“Alibaba’s AI inference chip has already been deployed to accelerate its recommendation system on its e-commerce platform. Baidu has integrated its Kunlun chip into its data centers and autonomous driving sector,” Wei Sun, a senior analyst at Counterpoint Research, told CNBC.

However, the company has continued to report significant losses and reportedly laid off workers last year, according to the South China Morning Post.

Cambricon Technologies is also on the U.S. Entity List.

Tencent, one of China’s biggest tech companies, is an investor in Enflame.