Nvidia's china ai chip access: settling for fourth best?

2025-07-16 nvidia

Washington, Wednesday, 16 July 2025.
commerce secretary howard lutnick revealed that china is only receiving nvidia’s fourth-best ai chips. this limitation stems from continued us government restrictions and nvidia’s strategic distribution of technology. lutnick stated the us wants china to get addicted to the american tech stack. this situation could affect nvidia’s revenue streams from the chinese market. it also raises questions about investment strategies in light of nvidia’s global market approach and technological competitiveness. the renewed sale of h20 chips is allegedly linked to a rare earths magnet deal.

H20 chip sales resume

Nvidia is set to resume sales of its H20 chip to China [1]. This decision follows a meeting between Nvidia CEO Jensen Huang and President Donald Trump [1][5]. The U.S. government has assured Nvidia that licenses for shipping the H20 chips will be granted [5]. Nvidia hopes to begin deliveries soon [5]. This reversal comes after previous restrictions were put in place [1]. Shares of Nvidia increased by over 4% following the announcement on Tuesday [5].

strategic implications for nvidia

The H20 chip was initially introduced in 2022 as a response to export controls imposed by the Biden administration [1]. Howard Lutnick, the Commerce Secretary, emphasized that the H20 chip being sold to China is not Nvidia’s most advanced technology [1]. He stated that China is receiving the fourth-best chip, as the U.S. aims to keep them using American technology [1]. Lutnick believes China is capable of developing its own technology [1]. His strategy involves making Chinese developers reliant on the American technology stack [1].

market dynamics and competition

Despite restrictions, Jensen Huang believes it is crucial for American companies to compete and serve the Chinese market [5]. He noted that half of the world’s AI researchers are located in China [5]. Nvidia had projected potential sales of $8 billion in H20 chips for the current quarter before sales were halted [1]. Broadcom recently launched the Tomahawk Ultra networking processor, posing a challenge to Nvidia’s NVLink Switch chip in AI data processing [6]. The Tomahawk Ultra can connect four times the number of chips compared to Nvidia’s offering [6].

analyst perspectives on nvidia’s future

Analysts anticipate Nvidia, AMD, and Broadcom will exhibit strong performance in their upcoming earnings reports due to rising AI chip demand [7]. KeyBanc analysts foresee Nvidia’s Blackwell AI platform accelerating production and the next-generation Blackwell Ultra chips beginning to ship [7]. Market sentiment remains positive towards Nvidia, citing its leadership in generative AI [7]. Investors are closely monitoring Nvidia’s operations in China, the impact of U.S. export controls, and feedback on the Blackwell platform [7].

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