Chinese tech giants like Alibaba and ByteDance continue to seek Nvidia's AI chips, including the new B30A model, despite U.S. export restrictions and Beijing's discouragement, highlighting the ongoing U.S.-Sino tech rivalry and Nvidia's crucial market position.

Nvidia AI Chips Retain Demand Among Chinese Tech Firms Amid Export Controls

U.S. chipmaker Nvidia (NVDA) continues to navigate complex geopolitical landscapes as major Chinese technology firms, including Alibaba Group Holding (BABA) and ByteDance, maintain robust demand for its advanced artificial intelligence (AI) chips. This persistent demand comes despite U.S. export restrictions and a concerted effort by Beijing to encourage the adoption of domestic alternatives, underscoring Nvidia's critical position in the global AI hardware market and the ongoing U.S.-Sino tech rivalry.

The Event in Detail

Chinese tech companies are actively seeking confirmation for existing orders of Nvidia's H20 processors, which were reapproved for sale in China in July. Concurrently, these firms are closely monitoring the development of a more powerful, next-generation Blackwell-based chip, tentatively known as the B30A. The B30A, if cleared by Washington, is anticipated to be significantly more powerful than the H20, potentially offering up to six times its performance at roughly twice the cost of the H20's current price of $10,000–$12,000. Both the H20 and B30A are downgraded versions of chips sold in other markets, specifically designed to comply with U.S. export regulations.

In contrast, Nvidia's recently launched RTX6000D, another AI chip designed for the Chinese market, has seen only modest interest. Priced around 50,000 yuan ($7,000), industry observers view it as expensive relative to its capabilities, noting that it underperforms the more powerful RTX5090, which is restricted from sale in China but available on the grey market at a lower price. Companies like Alibaba, Tencent (TCEHY), and ByteDance have reportedly held back from ordering the RTX6000D, awaiting clarity on H20 shipments and the potential approval of the B30A.

Analysis of Market Reaction

The sustained demand for Nvidia's higher-performance chips in China highlights the country's pressing need for advanced AI infrastructure, which currently cannot be fully met by domestic suppliers. Nvidia's stock experienced a 6% decline following a quarterly sales forecast that excluded potential revenue from China, a market that contributed 13% of its revenue in the past fiscal year. This market reaction underscores investor sensitivity to the company's access to the crucial Chinese market.

The geopolitical dimension is pronounced. To secure the resumption of H20 sales, Nvidia agreed to remit 15% of its China chip revenue to the U.S. government, an arrangement effectively functioning as an export tax. While this significantly impacts margins, with gross margins for the H20 estimated between 65–75%, the product remains highly profitable. However, this revenue-sharing deal and ongoing discussions by U.S. officials to potentially tighten curbs on sales to China introduce significant policy volatility and market uncertainty for Nvidia.

Broader Context & Implications

The U.S.-China tech rivalry is accelerating China's drive for self-reliance in semiconductor technology. While Chinese regulators have questioned firms about their H20 purchases, they have not imposed outright bans, indicating the current indispensability of Nvidia's technology. Domestic alternatives from companies like Huawei and Cambricon are gaining traction, but their offerings still lag significantly behind Nvidia's in terms of performance and supply. Huawei's Ascend 910C, for instance, offers approximately 60% of the inference performance of Nvidia's H100. To compensate, Huawei bundles numerous chips into larger systems to achieve comparable performance to Nvidia's Blackwell system.

Cambricon's Siyuan 590 chip has seen surging orders, with its first-half revenue increasing more than 40-fold year-over-year. Projections suggest that the proportion of domestically produced AI chips used in China could rise from 34% in 2024 to 82% by 2027. China's substantial investments in data centers, totaling $28 billion, further emphasize this push. While Nvidia's market share in China is expected to decline from 66% in 2024 to 55% this year, the sheer scale of the Chinese AI chip market, projected to grow at a 30.69% Compound Annual Growth Rate (CAGR) through 2030 and potentially representing a $50 billion revenue opportunity for Nvidia in 2025 alone, means that even a reduced share is substantial. The situation presents a delicate balance between short-term revenue gains for Nvidia and the long-term threat of an increasingly capable Chinese domestic industry.

Expert Commentary

Analysts continue to monitor the situation closely. Bernstein analysts anticipate Nvidia's market share in China will decrease, while Bank of America analyst Vivek Arya projects that Nvidia could generate an additional $6–$10 billion in China sales from August through January if shipments proceed for the incremental 300,000 H20 units ordered from Taiwan Semiconductor Manufacturing Co. (TSM). Despite the geopolitical headwinds, investor sentiment around Nvidia remains robust, with shares climbing over 27% this year, driven by strong demand for its data center business and AI-focused GPUs.

Looking Ahead

The trajectory of Nvidia's access to the Chinese market remains a critical factor for its future performance and the broader AI sector. Key factors to watch include further developments in U.S. export control policies, the approval status and shipping timelines for the B30A chip, and the continued progress of China's domestic semiconductor industry. The ongoing U.S.-Sino tech rivalry ensures that policy volatility will persist, making Nvidia's strategic adaptations and the evolving competitive landscape in China central themes for investors in the coming quarters.