Nvidia’s efforts to please both the US and China are getting harder as its H20 AI chips become bargaining chips between the two powers.

On July 31, the Cyberspace Administration of China (CAC) questioned the security of the H20 after US lawmakers demanded tracking features in exported chips.

The US barred sales of H20 chips to China in April, citing national security concerns.

Nvidia warned of up to US$5.5 billion in charges, though the actual hit was US$1 billion less.

The US-based chipmaker, now valued at US$4.4 trillion, has long relied on China, where clients include ByteDance, Tencent, and Alibaba.

Nvidia’s revenue from China dropped to 13% in its latest financial year, down from 26% in 2022. Meanwhile, Chinese firms such as Huawei and Cambricon are ramping up efforts to develop local AI chip alternatives as reliance on foreign suppliers becomes politically sensitive.

🔗 Source: The Economic Times

🧠 Food for thought

1️⃣ Export controls are accelerating China’s semiconductor localization despite short-term market disruptions

While Nvidia’s H20 chips remain in demand, the broader trend shows export restrictions are pushing China toward technological independence faster than anticipated.

Analysts project China’s AI chip localization ratio will surge from just 17% in 2023 to 55% by 2027, representing a dramatic shift in market dynamics within just four years1.

This acceleration is fueled by substantial government investment, with China’s National Integrated Circuit Industry Investment Fund directing approximately $95 billion into the semiconductor sector2.

The market response has been immediate. Domestic chipmaker Cambricon Technologies saw its stock price triple over the past year, closing at 923.70 yuan, as investors bet on the initiative to replace foreign software in IT systems by 20272.

Even as Nvidia maintained record China revenue of $17.1 billion in its latest financial year, analysts predict the company’s Chinese market share will drop from 66% to 54% in 2025 as customers hedge against future supply disruptions1.

This pattern suggests that while export controls may achieve short-term strategic goals, they simultaneously create powerful incentives for the targeted country to develop competing capabilities, potentially undermining long-term market positions for restricted companies.

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