Nvidia's Impossible Bind

The Made-For-China Chip

One way to think about the US-China tech war is as a grand strategic chess match. Another, it seems, is as a farce.

Last month, the story was that China was rejecting Nvidia’s made-for-China H20 chip because its homegrown alternative from Huawei was somewhat competitive. This week, the story got weirder. Nvidia rolled out its next made-for-China chip, the RTX6000D, and the country's tech giants are once again shunning it. But this time, the reason is even more peculiar. They aren't rejecting it because Huawei's chip is better; they are rejecting it because a banned, gray-market Nvidia chip is both better and cheaper.

The basic situation is that US export controls have created a market so distorted that Nvidia is now effectively competing with itself. The officially sanctioned, legal-to-import RTX6000D is, according to reports, too expensive for its mediocre performance. The real competition comes from another Nvidia product, the far superior RTX5090 gaming chip, which is banned from export to China but is readily available through smugglers. Here is Reuters on the strange economics of the situation:

Nvidia's RTX6000D has seen only lukewarm demand with some major tech firms opting not to place orders, two people with knowledge of procurement discussions said.

The RTX6000D, designed mainly for AI inference tasks, is seen as expensive for what it does, the two people said.

They added that testing of samples showed its performance lags the RTX5090 - a chip banned by the US for use in China but which is still readily available through grey market channels at less than half the RTX6000D's price of around 50,000 yuan ($7,000).

This is a new and profound level of confusion. The US government's own policy has created a market where the illegal American product is a far better value proposition than the legal one.

And Beijing is now skillfully exploiting this chaos. With Nvidia's official strategy in disarray, China has found new leverage. As trade talks continue, it has sprung a surprise antitrust probe on Nvidia. The message, as the Wall Street Journal notes, is clear: China now has power over America's most valuable tech company and is willing to use it as a bargaining chip.

This leaves Nvidia in an impossible bind. It is being squeezed from all sides. The US government tells it precisely what it is allowed to sell. The Chinese government is now telling its companies precisely what they are not allowed to buy. And in the middle, smugglers are selling a better product for less money. The irony is that the biggest competitor to Nvidia’s official China business isn’t Huawei; it’s an unofficial, black-market version of Nvidia itself.

Salesforce's Patriot Game

The problem for Salesforce is that its core business model—selling software seats to human salespeople—is facing a major threat from AI agents that can do the work of human salespeople. This has not been a good story for the stock, which has plunged 27% this year. And so, Salesforce is doing what many large tech companies do when facing uncertainty: it is looking for new, stable markets.

This week, the company announced the launch of "Missionforce," a new business unit dedicated to incorporating AI into national security and defense workflows. While Salesforce has held government contracts for years, this marks the first time it has created a dedicated, high-profile division for this market. Here is TechCrunch on the move:

Salesforce is increasing its focus on national security. The customer relationship management giant announced the creation of a new business unit called Missionforce on Tuesday. It will be focused on incorporating AI into defense workflows in three main areas: personnel, logistics, and decision making, according to a company press release.

The development is less a new narrative meant to impress Wall Street; government contracts are unlikely to contribute substantially to Salesforce's $38 billion in annual revenue, nor is defense work about to become a key focus of the company. Rather, it is a sign of a broader industry convergence.

Every major tech company—from OpenAI and Google to Palantir—is now a de facto defense contractor. The historic tension between Silicon Valley's ethos and the military-industrial complex is effectively over, and the US government has become a massive, undeniable customer for AI.

Salesforce is now entering an already crowded field. OpenAI, Anthropic, and Google have all recently launched initiatives to provide their AI models to federal agencies, often at heavily discounted rates, in a bid to become the foundational AI layer for the US government. The competition to become the government's preferred AI vendor is suddenly a very crowded affair.

The move is a sign that defense tech is no longer a niche; it is simply another enterprise vertical, and every major software company is now expected to have a strategy for it.

The Scoreboard

• Semiconductor: China says Nvidia violated anti-monopoly law after preliminary probe (CNBC)
• Software: Workday to buy AI firm Sana for $1.1 billion as HR software deal-making heats up (Reuters)
• Social Media: TikTok deal to include new investors with ByteDance; Oracle to keep cloud agreement, sources say (CNBC)