China AI Budgets Hit 46% Domestic, Nvidia Faces Market Share Threat
NVDA•China’s AI chip procurement budgets for domestic vendors rose to 46% in H1 2026, threatening Nvidia’s GPU market share in its second-largest region. Perplexity Labs plans to deploy Nvidia’s new Grace CPU in its AI services, marking one of the first major adopters of the processor.
1. Chinese AI Chip Budget Shift
China’s state-backed AI chip procurement budgets allocated to domestic suppliers climbed to 46% in the first half of 2026, up sharply from prior periods. This reallocation poses a headwind to Nvidia’s GPU sales as customers favor locally produced accelerators.
2. Competitive Pressure Intensifies
Nvidia and AMD are facing increased pressure from Chinese chipmakers backed by government subsidies and R&D incentives. Analysts warn that sustained budget reallocations could erode foreign suppliers’ growth in China’s burgeoning AI infrastructure market.
3. Perplexity Plans Nvidia CPU Integration
Perplexity Labs confirmed plans to integrate Nvidia’s forthcoming Grace CPU into its AI platform, aiming to optimize generative model performance. As one of the first software providers to adopt the new processor, Perplexity’s move showcases Nvidia’s push beyond GPU-based solutions.
