NVIDIA H20 AI Chips Face Surprise Blockage in China
In an unfortunate turn of events, NVIDIA has disclosed a significant setback regarding its strategy in the Chinese domain, stating that it has yet to sell a single H20 AI chip in that country, despite the lifting of export restrictions by the Trump administration itself. No more resistance from the US government; now it is just China, which refuses the imports on its territory, on the ground of security concerns.
Halting Sales and Q2 Earnings Effects
One of the significant headings in the recent second quarter report of NVIDIA is that of no H20 sales to customers located in China. With such halt in business, this has led to a frozen stalemate, where Chinese customers are repelled from involving in adopting NVIDIA's technology. The situation worries the corporation because it loses what could amount to revenue ranging from $2 billion to as much as $5 billion from H20 inventory alone and possibly "tens of billions" from a broader scope.
This was the great factor that accounted for NVIDIA's recent financial performance. While the overall figures exceeded estimates, however, expectations of data center sales fell slightly short. This, combined with the forecast figures of Q3 revenue pegged at $54 billion, no inclusion of China sales, left the company's stock standing still as investors reacted to slowing AI growth.
China's Push Towards a Fully-Domestic-Tech Stack
At the base of the matter is an investigation by the regulatory authorities in Beijing about possible security backdoors existing in the H20 chips. The investigation is said to be a dry run of procedures arising from President Trump and his AI action plan's particular security disposition. As a result, China will now advocate on its homegrown tech giants to avoid using NVIDIA's products and rather adopt a "fully-domestic" tech stack from those of Huawei and Cambricon.
New orders for NVIDIA hardware have effectively come to a halt due to government pressure, but migrating away from NVIDIA's established ecosystem is difficult and time-consuming for the Chinese companies.
NVIDIA's Strategy: Pushing for Blackwell
NVIDIA's CEO Jensen Huang has maintained his quest of returning to the highly lucrative Chinese market. He is now making his moves: not only has he been talking with the Trump administration on the H20, but also on how he could sell his next-generation rather termed Blackwell AI GPUs to China. Huang seems very optimistic about having US approval for Blackwell sales.
In offering to cut revenues from Blackwell sales to China for the US government, Huang has practically lined a Caduceus for the deal. The previous arrangement was that the company had to send over a 15% cut so that it could get licenses for H20 sales.
The company's future in the region remains uncertain, underpinning a fine balance between geopolitical tensions, national security policies, and the race for AI supremacy.
