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NVIDIA has reported that it has yet to sell its H20 AI chips after the U.S. government lifted export controls, but this time, the issue is not with the U.S.; instead, it’s facing resistance from China.
NVIDIA’s H20 AI Chips Become a Victim of ‘Geopolitical Tensions’, Causing Huge Concerns for Team Green
Team Green reported its Q2 earnings a few hours ago, and while the specifics were covered, one aspect was notably missing: China’s business. The company has not sold any H20 chips to Chinese customers for several quarters. Optimism initially arose when the Trump administration allowed NVIDIA to sell AI chips to China, but resentment began to surface from within China regarding security concerns with the H20 chips.
In its latest earnings report, NVIDIA stated that there were “no H20 sales” to China-based customers in the second quarter, aside from previous orders that had been delivered. This explains why a mysterious customer bought $650 million worth of H20 AI chips, which were previously reserved inventory and not included in Q2 figures. The situation is a deadlock for NVIDIA because its Chinese customers are hesitant to adopt the company’s technology, posing significant concerns about its future in China.
The Chinese regulatory authority initiated an investigation to uncover security backdoors in the H20 AI chips. This was driven by President Trump’s initiative to integrate security measures into his AI action plan, prompting China to convince domestic tech giants to avoid purchasing NVIDIA’s AI chips, instead adopting a fully-domestic tech stack from companies like China and Cambricon. However, this transition is not straightforward and cannot be achieved overnight.
NVIDIA believes that if H20 AI chip sales were initiated in China, they could potentially generate $2 billion to $5 billion in revenue from the region. More importantly, Team Green hopes to flood China’s AI market with a more capable ‘Blackwell-based’ solution, making it difficult for domestic firms to avoid adopting NVIDIA’s powerful chips. Jensen is even willing to offer a portion of the firm’s revenue to the U.S. government for such a deal.
Access to China is a significant challenge for NVIDIA and Jensen at present. It is one of the most critical moves for the company, given that they are missing out on ‘tens of billions’ in revenue. Additionally, domestic firms like Huawei are catching up, which could pose a threat to America’s dominance in the AI tech stack.
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