Nvidia, a well-known giant in the artificial intelligence chip industry, finds itself ensnared in the epicenter of the trade tensions between China and the U.S. Nvidia’s H20 GPU AI chip has become a focal point in the strategic rivalry in the geopolitical struggle for technology supremacy.
On the 17th of April, Jensen Huang, Nvidia’s chief executive, flew to China’s capital city, Beijing, to meet high-ranking government officials shortly after export control was imposed on its chips by the U.S. government. The export control imposed by the U.S. Commerce Department requires the company to obtain a license to export the H20 chip to China and was made effective from April 15. The department deemed this move necessary to protect the national and economic security of the United States.
The H20 chip, compared to other Nvidia chips, is a less powerful AI accelerator designed for the Chinese market. According to a senior analyst, Antonia Hmaidi from the Mercator Institute for China Studies, Nvidia has sold one million units of H20 chips to China in 2024 alone.
According to the Financial Times, Nvidia’s Chinese rival, Huawei, is increasing production of their domestically developed chip, “Ascend”; however, in 2024, they were only able to ship out 200,000 units of the chip, giving a large disparity between the production levels of the two countries in the semiconductor market and China’s dependency on the U.S. for the chips.
Following the announcement of the export control, Nvidia experienced a loss of $5.5 billion. The H20 chip was released in Q2 of 2024 and was intentionally made with lesser capabilities to ensure it fell within the limits of the export control set by the U.S. government to restrict exports of advanced technology to China.
The H20 chip has less computing power when compared to Nvidia’s H100 AI chip, which has already been banned for sale to China. According to Jay Hatfield, the chief executive at Infrastructure Capital Advisors , “Nvidia specifically designed the H20 to comply with US restrictions…now the rules have changed and they lost $5 billion. This inconsistent trade policy is costing companies a lot of money.”
The H20 chip has been pivotal in training Chinese AI models like DeepSeek, enabling the company to create a powerful and cost-effective AI model comparable to ChatGPT. The enforcement of export control on Nvidia chips has led analysts to believe it will serve as a strategic blow to prevent Nvidia from continuing business with its Chinese customers.
The Chinese market has a high demand for Nvidia’s H20 chip; other companies like Tencent, Alibaba, and ByteDance are a part of its top-tier customer base in China.
Prior to the implementation of the new export control policy, these companies had placed outstanding orders for the chips. However, due to the spontaneity of the policy implementation, Nvidia is expected to lose $5.5 billion on orders they can no longer legally complete.
Nvidia has been a driving force in the AI advancement in China and the global AI revolution. In response to the export control policy, China will be pushed to focus more on developing domestically made chips to reduce its reliance on chip imports, and Nvidia will be losing a customer base that makes up over 13% of its revenue.
