Nvidia is expected to resume sales of its H20 AI chips in China, but analysts say its return is unlikely to restore the dominance it once held, given intensifying competition and regulatory challenges.
Last month, the Trump administration signaled it would allow Nvidia to reintroduce its H20 chips to the Chinese market, following a de facto export ban implemented in April. Nvidia also announced the launch of a new “fully compliant” chip designed specifically for China.
While this development is seen as a significant win—potentially recovering billions in projected losses—it may not translate into a full market rebound. Analysts warn that Nvidia’s foothold in China has already weakened.
According to a recent report by global research and brokerage firm Bernstein, Nvidia’s share of China’s AI chip market is projected to fall from 66% in 2024 to 54% by 2025. The decline isn’t solely due to the earlier supply disruptions. Domestic chipmakers such as Huawei, Cambricon, and Hygon have rapidly gained ground amid U.S. export restrictions.
“Export controls from the U.S. have opened the door for local AI chipmakers to thrive, as they no longer have to compete with the most advanced global products,” Bernstein stated. The firm predicts China’s reliance on local AI chips will rise dramatically—from 17% in 2023 to 55% by 2027.
Some industry leaders, like Daniel Newman, CEO of The Futurum Group, remain optimistic about Nvidia’s recovery in China. However, he noted that customers who shifted to local alternatives during the H20 ban may now be hesitant to switch back.
Bernstein’s outlook also assumes that U.S. chip restrictions will largely stay in place. If so, Chinese firms are likely to continue developing more competitive alternatives, reducing the appeal of older U.S. chips.
Push for Policy Shifts
Before the policy rollback, Nvidia CEO Jensen Huang had actively pushed for greater market access in China, arguing that restrictive export rules were hindering American innovation.
While officials described the policy shift as part of ongoing trade talks, some analysts echoed Nvidia’s call for a more flexible approach. Reva Goujon, director at the Rhodium Group, said maintaining U.S. tech involvement in China could help preserve American influence.
Rhodium’s July report proposed a “sliding scale” approach to chip export rules, which could allow more U.S. companies to operate in China, even as Chinese firms continue to advance technologically.
Still, even as Nvidia chips return, Beijing appears committed to developing local alternatives. Goujon noted that China’s cyberspace authority recently summoned Nvidia, signaling an intent to reinforce state influence over the domestic AI ecosystem.
Increased Regulatory Scrutiny in China
Nvidia’s meeting with the Cyberspace Administration of China last week centered on national security concerns tied to the H20 chips. Chinese officials reportedly raised questions about possible “backdoors” that could give U.S. actors unauthorized access or control—an allegation Nvidia firmly denied.
The move followed proposed legislation in the U.S. that would require semiconductor firms to implement security features and geolocation verification in advanced AI chips—prompting similar concerns in China about foreign surveillance and control.
While Nvidia’s return to China offers hope for recouping some lost ground, it’s clear that both geopolitical friction and rising local competition will continue to reshape the AI chip landscape.
