Chinese authorities are reportedly probing the use of hardware from Broadcom Inc. (NASDAQ: AVGO) in state-backed data centres.

China's State-owned Assets Supervision and Administration Commission (Sasac) has been evaluating the prevalence of Broadcom switches in state-controlled data centres to boost domestic reliance, the Financial Times reported Tuesday. These high-end switches are essential for transmitting large volumes of data at high speeds in data centres.

The investigation is part of Sasac's "domestic chips for domestic use" campaign, which aims to boost the utilization of homegrown semiconductors and AI products across China's public sector. Preliminary findings indicate that Broadcom switches could be present in up to 90% of state-owned companies, according to the report.

This high penetration rate might prompt Sasac to issue informal guidance to decrease the use of Broadcom switches in domestic data centres, as per the report.

The commission is also investigating whether Broadcom has exploited its market leader status to bundle other products or enforce large purchase requirements. The U.S.-tech giant's alleged tactics are said to have limited Chinese firms such as H3C Technologies and Ruijie Networks from sourcing switches from other suppliers, including Huawei, the publication reported.

Broadcom did not immediately respond to MarketDash's request for comments.

Nvidia, AMD Caught Amid China's Domestic Tech Push

This development comes as part of China's broader push to strengthen its domestic AI infrastructure. Broadcom, Nvidia Corp. (NASDAQ: NVDA) and Huawei sell high-end switches in China, with state-backed data centers still using a significant number of Broadcom switches despite restrictions on Nvidia products, as per FT.

Last week, Chinese tech giant Huawei unveiled over 10 new chipsets for AI computing infrastructure. The move is seen as a bid to challenge the dominance of Nvidia, Advanced Micro Devices (NASDAQ: AMD), and Intel Corp. (NASDAQ: INTC) in the market.

Earlier this month, Chinese AI chipmaker Enflame Technology surged more than 223% in its Shanghai debut after raising 6.12 billion yuan ($912 million) in its IPO, as investors bet domestic chipmakers can challenge Nvidia's dominance in China's AI accelerator market.