nvidia faces disruption as china aims for gpu independence
hong kong, Thursday, 17 July 2025.
morgan stanley forecasts china’s gpu self-sufficiency will reach 82% by 2027. this projection signals a major shift in the global semiconductor landscape. the increased domestic production could significantly reduce reliance on international suppliers. nvidia’s market share and revenue may be affected. tsmc is identified as a promising investment within the greater china semiconductor sector. this is due to the anticipated surge in ai demand. the report highlights the growing capabilities within china’s semiconductor industry.
Nvidia’s response to export restrictions
Nvidia has strategically navigated U.S. export restrictions by developing the H20 chip specifically for the Chinese market [4][5]. This adaptation followed earlier restrictions on advanced AI chip exports to China implemented in December 2024 [4]. Despite these efforts, Chinese tech companies have faced challenges in acquiring sufficient quantities of the H20 [4]. Industry analysts note that the H20’s performance is significantly lower than Nvidia’s flagship H100 chip, raising concerns among Chinese firms [4]. This has spurred demand for domestic alternatives, impacting Nvidia’s competitive edge [4].
Market share and revenue impact
Past restrictions have already significantly affected Nvidia’s market position in China [5]. Nvidia’s market share plummeted from approximately 95% to below 50% [5]. The company faced a $5.5 billion write-off in inventory and abandoned approximately $15 billion in sales plans [5]. TrendForce has adjusted its forecast, estimating that Nvidia and AMD could capture 49% of China’s AI chip market, up from a previous estimate of 42% [4]. This adjustment reflects the evolving dynamics of the AI chip market in China [4].
U.S. policy and nvidia’s strategy
Nvidia announced the resumption of H20 chip sales to China and the launch of the RTX PRO GPU, after securing export licenses from the Trump administration [5]. CEO Jensen Huang has made multiple visits to China, underscoring the importance of the Chinese market to Nvidia [2]. Huang also met with President Trump prior to this recent China trip [2]. Amidst these developments, U.S. senators have cautioned Huang against engaging with entities closely tied to the Chinese military or those subject to U.S. export controls [2].
China’s push for self-sufficiency
China’s drive for GPU self-sufficiency is fueled by the increasing demand for AI and high-performance computing [1][6]. This initiative is underpinned by substantial government support for local GPU manufacturers [6]. The move towards domestic production aims to mitigate reliance on foreign suppliers and address concerns over potential disruptions [6]. The trend towards ‘de-Americanization’ in China’s IT sector reflects a broader strategy to reduce dependence on U.S. technology [2]. This ambition poses a long-term challenge to Nvidia’s dominance in the Chinese market [1].
Competitive landscape and alternative solutions
The restrictions and the push for self-sufficiency have intensified competition in the Chinese AI chip market [2]. Huawei is emerging as a significant competitor, challenging Nvidia’s market share [2]. Companies like Groq, Cerebras Systems, SambaNova Systems, Tenstorrent, D-Matrix and Mythic AI are also developing alternative solutions to Nvidia’s GPUs [3]. Groq, for example, focuses on the ‘inference’ phase of AI model development and has raised over $1 billion in equity financing [3]. These companies are vying for a share of the growing AI chip market [3].