NVIDIA’s AI Chip Dilemma in China: Supply Crunch, Trade Tensions, and What Lies Ahead

NVIDIA Corporation (NASDAQ: NVDA) is once again at the center of geopolitical crosshairs. The chipmaker has informed Chinese clients that supplies of its most powerful China-compliant AI chip — the H20 — are limited and it has no immediate plans to restart production. This comes despite earlier expectations that U.S. regulators would allow resumed sales of the chip.

A Chip Caught Between Superpowers The H20, developed in response to Biden-era export curbs, was the most capable AI chip NVIDIA could legally sell in China. That changed when the Trump administration implemented stricter rules in 2025, halting exports and complicating NVIDIA’s supply chain strategy.

Now, despite recent diplomatic thawing — including resumed rare earth shipments from China and eased export controls from the U.S. — NVIDIA’s hands remain tied as Washington delays issuing fresh export licenses for the H20.

Why the H20 Matters The H20 isn’t just another chip — it’s essential to China's AI ambitions. It powers operations across several tech giants including:

Alibaba (NYSE: BABA)

Tencent

Baidu (NASDAQ: BIDU)

ByteDance

DeepSeek AI

The chip’s absence threatens to slow down Chinese advancements in generative AI, especially as domestic alternatives continue to lag behind NVIDIA’s technology in performance and efficiency.

Impact on NVIDIA and Its Valuation Although China accounts for a smaller percentage of NVIDIA’s overall revenue, the AI boom has made every customer count. A prolonged sales halt could pressure top-line expectations, especially as competition from AMD and local Chinese players like Huawei intensifies.

Investors can track NVIDIA’s revenue segmentation and international exposure using the Revenue Product Segmentation API, which breaks down revenue by product and geography.

For a real-time view on how markets are pricing in these risks, you can also refer to Company Ratings, which aggregate analyst sentiment and valuation models on publicly traded firms like NVIDIA.

What’s Next? Washington’s delay in greenlighting H20 sales could be a tactical lever in larger trade talks. For NVIDIA, the short-term strategy might shift to reallocating H20 inventory and doubling down on non-China markets — especially as global AI demand shows no signs of slowing.

In the long run, NVIDIA’s edge in AI hardware remains intact, but its access to one of the world's largest tech markets will depend less on innovation — and more on diplomacy.