China's Huawei Technologies is close to introducing a new chip for artificial intelligence use to challenge Nvidia in China amid U.S. sanctions, the Wall Street Journal reported on Tuesday, citing sources.

Huawei's latest processor, Ascend 910C, is being tested by Chinese internet and telecom companies in recent weeks, the report said, adding that Huawei has told potential clients that the chip is comparable to Nvidia's H100.

Huawei did not immediately respond to a Reuters request for comment.

U.S. regulators last year put in place rules that stopped Nvidia from selling its advanced chips, including the H100, to Chinese customers, citing national security concerns.

Nvidia then introduced three chips tailored for China, including the most-closely watched H20 chips. However, in line with U.S. sanctions, H20's computing power had been significantly capped compared to the H100 chips.

The Journal report said Huawei aims to start shipping its newest chip as soon as October.

Companies such as TikTok parent ByteDance, Baidu and China Mobile are looking to obtain the 910C chips.

Initial negotiations between Huawei and potential customers indicate that orders are likely to surpass 70,000 chips, with a total value of around $2 billion, according to the report.

(Reporting by Devika Nair in Bengaluru; Editing by Arun Koyyur)