Chinese chip designers, including Tencent Holdings Ltd (TCEHY  ), actively promote their AI chips as alternatives to Nvidia Corp's products. They hope U.S. export restrictions will encourage clients to switch.

Nvidia (NVDA  ) dominates up to 90% of China's $7 billion AI chip market. Still, recent U.S. technology controls have given an opening to smaller companies like Hygon Information Technology and startup Iluvatar CoreX to challenge Nvidia, Reuters reports.

Huawei Technologies is making significant progress with its Ascend 910B chip, comparable in computing power to Nvidia's A100.

Tencent, known for its social media and gaming dominance, is leveraging its AI inference chip Zixiao, developed with Enflame, to offer performance similar to some Nvidia chips.

Tencent is proposing its Zixiao v1 as a cost-effective alternative for Nvidia's A10 and is developing a v2Pro variant for AI training to replace Nvidia's restricted L40S chip.

Tencent uses the Zixiao chips internally and offers computing power through its cloud services, including Nvidia and Advanced Micro Devices, Inc options.

Tencent-backed Enflame and Iluvatar CoreX also market their AI training accelerator chips as substitutes for Nvidia's advanced A100 chip. Hygon is promoting its new GPU, Shensuan No. 2, as compatible with Nvidia's CUDA platform, allowing easy switching for Nvidia users.

Furthermore, Intellifusion announced its Deepedge10 chip to compete with Nvidia's H20, which complied with export curbs and was likely to take advantage of Nvidia's situation.

These developments come as Chinese technology firms, including Tencent and Baidu Inc (BIDU  ), seek domestic sources for AI training chips due to U.S. restrictions.

However, production capacity remains challenging for these emerging Chinese chipmakers due to U.S. curbs on foundries like Taiwan Semiconductor Manufacturing Company Ltd working with Chinese firms. Despite these limitations, the market opportunity is growing as tech giants prioritize diversifying their AI chip sources beyond Nvidia's offerings.

Price Action: NVDA shares traded higher by 0.46% at $477.26 premarket on the last check Monday.