The warning indicates the firm has few options to hedge the risk of a chip supply shortage.
The shares have been knocked back despite a steady run up in 2023 – peaking at 66 yuan (US$9.21) in mid-June – due to strong demand for AI servers as Chinese tech firms seek to roll out competitor products to OpenAI’s ChatGPT.
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Inspur shares closed at 41.2 yuan on Wednesday, down by 10 per cent, the maximum percentage it can fall in one trading day.
Inspur was previously at risk of being sanctioned by the US in 2020 when it was included in a list of 20 Chinese companies alleged to have links with China’s military, according to the US Department of Defence.
Intel briefly suspended shipments to Inspur in June 2020 but the shipments were later resumed when it was clear the company had not been sanctioned.
Inspur was finally added to the US Commerce Department’s Entity List this March as the US ratcheted up moves to restrict China’s access to advanced chips amid rising geopolitical tensions.
Inspur’s problems could have wider implications for China’s AI industry. For example, it is a key supplier of AI servers to Baidu, the search engine giant that is a leading contender in the race to compete with ChatGPT.
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Inspur has also signed strategic partnership deals with Alibaba Cloud and Tencent Holdings, and its servers are also used by China’s key infrastructure providers such as China Mobile, according to earlier corporate announcements. Alibaba owns the South China Morning Post.
In its 2019 annual report, which is the last time Inspur disclosed its top suppliers, Nvidia was ranked No. 2 among its top five suppliers, accounting for nearly 8 per cent of its purchasing budget that year.