By Julie Zhu and Clare Jim
HONG KONG (Reuters) - Nvidia (NASDAQ:NVDA) is seeking a site in Shanghai for a research and development centre, three sources close to the matter said, reflecting the strategic significance of the Chinese market where U.S. curbs on advanced chip exports have hit sales.
The U.S. chipmaker began the search in early 2025 and is primarily evaluating locations in Shanghai’s Minhang and Xuhui districts, one of the sources said.
The project gained momentum after a surprise visit to China by Nvidia CEO Jensen Huang last month, said two of the sources.
Huang, who has consistently said China is critical to Nvidia’s growth, made his visit immediately after the U.S. placed new restrictions on China-bound shipments of its H20 chips, the only AI chip the company can sell legally in China.
Huang met senior Chinese officials, including Vice Premier He Lifeng and Shanghai’s mayor Gong Zheng.
Reuters reported earlier this month that Nvidia plans to release a downgraded version of the H20 chip for China in the next two months, as it seeks to prop up sales in the country, where it has been lost market share to domestic rivals such as Huawei.
"We are not sending any GPU (graphics processor unit) designs to China to be modified to comply with export controls," an Nvidia spokesperson said in an emailed statement.
The company is leasing a new space for existing employees in China, but no core intellectual property or GPU designs are being sent to that facility or any others in the country, the spokesperson added.
When asked by reporters in Taipei on Friday if the report about its plan to set up a research center in Shanghai was true, Huang said: "We already have a research center in Shanghai. We have 2,000 people in Pudong. Nvidia has been in China for 30 years."
Nvidia currently has offices in Beijing, Guangzhou, Shanghai and Shenzhen, according to its website.
China generated $17 billion in revenue for Nvidia in the fiscal year ending January 26, accounting for 13% of the company’s total sales.
The local government of Shanghai, which hosts China’s largest foreign business community, including firms such as Tesla (NASDAQ:TSLA), has expressed willingness to offer incentives for the Nvidia project, including tax reductions, said two of the sources.
The local authorities are also considering offering a substantial amount of land to Nvidia for its China R&D centre, one source added.
The Shanghai city government did not immediately respond to a Reuters request for comment. The sources declined to be named, as the plan is not public.
Following his visit to China, Huang told CNBC that the country’s AI market could reach approximately $50 billion within the next two-to-three years.
He said that being excluded from this rapidly expanding sector would represent a "tremendous loss" for Nvidia, especially as competition with Huawei intensifies.
During an earnings call in February, before H20 chip sales to China were restricted, Nvidia executives said the company’s sales to China were about half the level before U.S. export controls.
Since 2022, the U.S. government has imposed restrictions on the export of Nvidia’s most advanced chips to China, citing concerns over potential military applications.
The Financial Times first reported on Friday about Nvidia’s plan to build a R&D centre in China.