Nvidia Caught in the Crossfire of US-China AI Chip Tensions
Nvidia, the world-leading AI chipmaker, has once again found itself entangled in the growing technological rivalry between the United States and China. The company’s chief executive, Jensen Huang, travelled to Beijing this week, shortly after Washington introduced new restrictions on exporting Nvidia’s AI-focused H20 chip to China.
Under the latest directive from the US Commerce Department, Nvidia will now require government-issued licences to export the H20 chip to Chinese clients. Authorities have justified the move as part of efforts to safeguard both national and economic security. Nvidia, meanwhile, confirmed that officials indicated these controls would remain in place for the “indefinite future.”
The restrictions mark another chapter in the ongoing battle between the world’s two largest economies to dominate artificial intelligence — and Nvidia’s powerful semiconductors sit squarely at the centre of that struggle.
Why Nvidia’s AI Chips Matter to US-China Rivalry
Nvidia is best known for designing advanced semiconductors critical to generative artificial intelligence (AI). These chips power systems capable of creating new content from user prompts, including platforms like ChatGPT.
Fueled by surging demand, Nvidia has rapidly ascended into the ranks of the world’s most valuable companies. In November last year, it briefly overtook Apple to claim the top spot in global market capitalisation.
Due to the significance of its technology, Nvidia’s dealings with China have come under close scrutiny from successive US administrations. Washington aims to slow China’s access to high-performance AI chips, particularly those that could support military applications, while securing American leadership in the AI race.
The H20 Chip: A Target of US Sanctions
The H20 chip, which Nvidia designed specifically to comply with earlier export restrictions introduced in 2022 by President Joe Biden’s administration, is now facing additional limitations. While the more powerful H100 chip has long been prohibited from sale in China, US officials have raised concerns about the growing capabilities of Chinese firms using less advanced alternatives.
This concern heightened following reports on DeepSeek, a Chinese AI company, which claimed it could deliver ChatGPT-like performance using non-restricted chips. The announcement triggered fears in Washington that even watered-down hardware could accelerate China’s AI ambitions.
Chinese tech heavyweights including Tencent, Alibaba, and ByteDance — the parent company of TikTok — had already placed significant orders for the H20 chip. However, with the new export rules taking effect immediately and offering no grace period, Nvidia now estimates a $5.5 billion shortfall from orders it can no longer fulfill.
Beijing-based analyst Chim Lee of the Economist Intelligence Unit noted that China has been actively developing domestic AI chip alternatives, including those by Huawei. Although these products are currently considered technically inferior, the curbs could push Chinese firms to close the gap faster. “It will introduce challenges to China’s AI scene, but it won’t massively slow down China’s AI development and deployment,” Lee added.
Why Jensen Huang Visited China Amid Export Turmoil
China remains a pivotal market for Nvidia, accounting for 13% of its total sales last year. Though this share still trails behind the US, which generates nearly half of Nvidia’s revenue, the Chinese market is too significant to ignore.
Industry observers believe Huang’s visit aimed to reaffirm Nvidia’s long-term commitment to China despite the fresh regulatory hurdles. During a meeting with Ren Hongbin, chairman of the China Council for the Promotion of International Trade, Huang expressed hope for “continued cooperation with China,” according to state broadcaster CCTV.
Additionally, the Financial Times reported that Huang met with DeepSeek’s founder, Liang Wenfeng, highlighting Nvidia’s interest in maintaining ties with key players in China’s AI ecosystem. Chinese state media also revealed that Vice Premier He Lifeng reassured Huang of China’s vast market potential for both investment and consumption.
In a separate meeting with Shanghai’s mayor, Huang reinforced Nvidia’s dedication to the Chinese market, according to a statement released by the Shanghai municipal government.
A Divided Tech World: The Impact of Export Curbs on Global AI Competition
The US government’s latest export controls are part of a broader strategy to reduce dependence on Chinese supply chains and boost semiconductor manufacturing on home soil. In line with this agenda, Nvidia recently announced plans to develop AI server infrastructure in the US, valued at up to $500 billion. Former US President Donald Trump, in response, claimed that his re-election bid played a role in influencing the company’s decision.
Separately, Taiwan Semiconductor Manufacturing Company (TSMC) — Nvidia’s primary chip supplier — has pledged an additional $100 billion investment to expand its advanced chipmaking facilities in Arizona.
According to Gary Ng, senior economist at Natixis, these developments reflect a clear divide emerging within the global tech landscape. “Tech will be less global in that sense, and it will be subject to more restrictions,” he explained. Ng’s observation underscores an increasingly polarised market, with the US and China forging separate technological ecosystems in a race to secure digital supremacy.
