Nvidia faces scrutiny: ai chip 'kill switch' denial amid us-china tech war

2025-08-06 nvidia

Santa Clara, Wednesday, 6 August 2025.
Amid escalating tensions, Nvidia is caught between US and China. China alleges Nvidia’s AI chips have a ‘kill switch.’ Nvidia denies this, stating its GPUs lack remote deactivation. This denial highlights Nvidia’s delicate balancing act. Losing sales from export restrictions could cost Nvidia $8 billion. The US government is closely monitoring sensitive chip flows, adding to the geopolitical complexity. Investors should watch how Nvidia navigates these challenges, as its market access and supply chain are at stake.

Nvidia’s denial and market implications

Nvidia’s Chief Security Officer, David Reber, refuted claims of a ‘kill switch’ in their GPUs [1]. He emphasized that such backdoors pose cybersecurity risks [1]. This denial comes after the Cyberspace Administration of China requested documents regarding security vulnerabilities in Nvidia’s H20 chip [1]. These events underscore the delicate balance Nvidia faces amid US-China tensions [1]. The company’s stock performance is closely tied to its ability to navigate these geopolitical challenges while maintaining its technological edge [GPT].

The h20 chip controversy

The H20 chip, a ‘special edition’ AI chip for the Chinese market, has been at the center of the controversy [6]. It was briefly banned from export to China in April 2025 [1]. The Trump administration later granted a waiver for sales to resume [1]. Nvidia estimates that restrictions on China-bound H20 chips could reduce its guidance by approximately $8 billion [1]. Despite being less advanced than the latest Blackwell architecture, the H20 still outperforms most domestic Chinese AI chips [6].

Smuggling and export controls

Two Chinese nationals in California were recently arrested for illegally shipping millions of dollars worth of Nvidia AI chips, including H100s, to China [4][5]. These illegal exports occurred between October 2022 and July 2025 [4]. Nvidia has stated that diverted products receive no service, support, or updates [4]. This incident highlights the challenges in enforcing export controls and preventing the unauthorized flow of advanced technology to China [4][5].

SoftBank’s strategic investment

Amid these challenges, SoftBank has significantly increased its investment in Nvidia [7]. SoftBank increased its Nvidia holdings to approximately $3 billion as of the end of March, a threefold increase from the previous quarter’s $1 billion [7]. SoftBank’s CEO, Masayoshi Son, views Nvidia as a key player in the AI revolution [7]. This investment reflects a broader strategy to focus on AI infrastructure and hardware, aiming to capitalize on the growing demand for AI chips [7].

Future prospects and competition

Nvidia is actively developing its next-generation AI GPUs, ‘Vera’ and ‘Rubin’ [2]. These chips are expected to enter mass production by early 2026 [2]. The GB300 AI chip, set to launch in the second half of 2025, may even exceed new iPhone shipments [3]. However, Bernstein predicts Nvidia’s market share in China’s AI chip market will decrease from 66% to 54% in 2025 [6]. They anticipate that the proportion of domestically produced AI chips in China will rise from 17% in 2023 to 55% by 2027 [6].

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AI Chips Geopolitics