Sources close to the matter said that the Ministry of Industry and Information Technology (MIIT) wants firms like Alibaba and ByteDance to justify their use of Nvidia chips rather than those locally made.

This bureaucratic snooping has already spooked some companies into shrinking their orders, according to two insiders.

One data centre owner muttered to the FT: “It’s not banned but has kind of become a politically incorrect thing to do.”

Chinese regulators have become increasingly twitchy about any Nvidia hardware ending up in sensitive state or security-related kit. Bloomberg reported this week that authorities have begun warning companies off the H20 chips for anything government-linked.

Beijing’s policy nudging is also helping local suppliers. Domestic chip outfits like Huawei and Cambricon have started clawing back market share ever since the US imposed restrictions on Nvidia’s Chinese business.

The H20 isn’t even a full-fat Nvidia chip. It’s already been hobbled to meet US export rules, and now Nvidia is forking over 15 per cent of its China revenues to Washington just to keep shipping them.

This eyebrow-raising arrangement has left the company caught between Chinese and US paranoia.

Security hawks in the US aren’t thrilled either. They reckon even watered-down Nvidia chips still give Beijing’s military types a leg-up in the AI arms race.

Chinese regulators have their own beef with the tech. Rumours have swirled about H20 chips enabling tracking or remote shutdowns, something Nvidia flat-out denied.

“Nvidia does not have ‘backdoors’ in our chips that would give anyone a remote way to access or control them,” the company insisted. “Cybersecurity is critically important to us.”

This week, Donald Trump threw more petrol on the bonfire by saying he might let Nvidia flog a newer chip based on its latest Blackwell platform in China despite the fact the H20 is already crippled to satisfy Washington’s demands.

Bernstein analysts reckon Nvidia’s grip on the China AI chip market is starting to slip. They predict a fall from 66 per cent market share in 2024 to 55 per cent this year.