Semiconductor Manufacturing International Corporation (SMIC) saw its stock soar 5.03% in pre-market trading on Friday, as Chinese chip stocks experienced a significant rally. This surge comes amid news that Nvidia Corp. has instructed its suppliers to halt production related to its H20 AI chip designed for the Chinese market.

According to reports, Nvidia has asked component suppliers, including Samsung Electronics Co. and Amkor Technology Inc., to stop production of the H20 chip. This decision follows pressure from Beijing urging local companies to avoid using the H20, raising questions about the fundamental demand for Nvidia's China-specific AI accelerators. The move potentially opens up opportunities for domestic Chinese chip manufacturers.

The halt in Nvidia's H20 production could benefit Chinese chip companies like SMIC, as it aligns with China's broader objective to build a world-class domestic semiconductor industry and reduce reliance on US technology. This development, coupled with recent US restrictions on high-end AI chip sales to China, may create a more favorable environment for Chinese chip manufacturers to expand their market share and technological capabilities.