Nvidia (NVDA) CEO Jensen Huang recently expressed concerns regarding the technology landscape between the United States and China. In his appearance on the B2G podcast, Huang mentioned that China is merely nanoseconds behind U.S. chipmakers in developing hardware essential for capitalizing on the booming artificial intelligence (AI) market. While Nvidia has historically led the AI sector, the company's growth has begun to plateau, and its stock performance has been inconsistent.
As the situation evolves, a significant challenge has emerged: the Chinese government appears to be tightening its grip on Nvidia's operations. Chinese firms are increasingly looking to rival the U.S. tech giant in the AI space. On the same day Huang's podcast was released, Bloomberg reported that the Chinese AI company iFlytek has started training large language models using Huawei's Ascend chips. This shift highlights how major Chinese tech firms are adapting to U.S. sanctions by turning to domestic alternatives, signaling a real threat to Nvidia's position in China.
Nvidia remains the world's most valuable company, becoming the first to achieve a market valuation exceeding $4 trillion. The company is a leader in providing AI training GPUs. However, as Chinese firms pivot towards homegrown hardware, Nvidia's dominance in the Asian market may come under threat. Compounding the issue, the U.S. government announced a ban on the sales of Nvidia's H20 processors to China in July, only to retract the decision later. These export restrictions jeopardize Nvidia's ability to generate revenue in a critical market.
The company reported no sales from its China H2O chip in its fiscal second-quarter earnings, released on August 27. Furthermore, management excluded H20 sales to China from its fiscal third-quarter revenue outlook of $54 billion. In a recent development, Nvidia secured a license to sell its H20 AI chips in China but agreed to pay 15% of its revenue from these sales to the U.S. government. The ongoing trade discussions and apprehensions regarding a slowdown in AI spending have contributed to the volatility in Nvidia's stock throughout 2025.
Despite the challenges, Nvidia's shares have seen a significant rebound since hitting lows in April, climbing over 115% and achieving new highs. The stock reached a record high of 192.57, remaining in a buy zone above an entry point of 184.48. With shares back above their 10-week moving average, Nvidia's stock has proven resilient, especially after testing this benchmark in its stage two base. Huang reassured investors this week, stating that demand for artificial intelligence computing has surged in the past six months, signaling a potential new industrial revolution.
In light of U.S. export bans, China has taken measures to counter Nvidia's influence. Chinese regulators have reportedly advised domestic firms against purchasing the H20 chip, urging them to explore local alternatives. This scrutiny has extended to Nvidia's latest China-only chip, the RTX Pro 6000D, with the Cyberspace Administration of China directing companies like Alibaba (BABA) and ByteDance to halt testing and planned purchases. Huang expressed disappointment over these developments, indicating that major Chinese tech firms are being discouraged from acquiring Nvidia's processors tailored for their market.
The motives behind China's targeting of Nvidia remain unclear. Chris Miller, author of Chip War: The Fight for the World's Most Critical Technology and professor at Tufts University, suggests that Beijing is seeking leverage in trade discussions with the U.S. while also striving for long-term semiconductor independence. He points out that while China has made strides in domestic production, advanced chip manufacturing remains a challenge.
In mid-September, Chinese regulators announced a preliminary investigation into Nvidia for potential violations of the country's anti-monopoly laws. This investigation coincided with the U.S. government's requirement for Nvidia to pay a portion of its revenue from AI chip sales in China. Despite Huang's vision of a $50 billion opportunity in China with 50% annual growth, the company now faces significant headwinds.
While Nvidia's graphics processors are considered the industry standard, the Chinese government is actively seeking to reduce reliance on foreign technology. Reports indicate that Chinese regulators have assessed how domestic companies like Huawei, Cambricon, Alibaba, and Baidu compare against Nvidia's products. Initial evaluations suggest that these Chinese AI chips are performing at comparable levels to Nvidia's offerings, representing a potential shift in the competitive landscape.
Several companies are racing to fill the gap in China's AI chip market:
HuaweiHuawei is viewed as a significant challenger to Nvidia, producing its own Ascend line of AI chips. iFlytek, a prominent AI tech company, utilizes Huawei's platform for training its large language models. However, manufacturing remains a critical bottleneck for Huawei, limiting its ability to meet domestic demand for advanced chips.
AlibabaAlibaba is also making strides in chip development, focusing on compatibility with Nvidia's platform. The company has announced plans to exceed its $53 billion AI infrastructure budget due to overwhelming demand. Alibaba has developed a new chip and launched its largest AI language model, Qwen3-Max, as part of its strategy to compete in the AI landscape.
MetaXFounded by former AMD engineers, MetaX has introduced a chip that it claims could replace Nvidia's H20. Despite facing significant financial losses, the company is preparing for mass production of its new processor.
Moore ThreadsThis startup, founded by former Nvidia employees, focuses on GPU design and has attracted investments from major firms. However, recent U.S. sanctions have restricted its access to American technology.
CambriconCambricon Technologies has experienced strong demand for its Siyuan 590 processor, achieving significant revenue growth. Despite warnings regarding trading risks, the company remains a key player in China's AI chip sector.
BaiduBaidu develops its own chips for servers and self-driving vehicles, placing it among the main domestic developers in China. The company recently unveiled technology aimed at creating virtual livestream hosts, showcasing its capabilities in AI.
The pivotal question remains: will China's chipmakers eventually close the technological gap with Nvidia? Analysts suggest that while it may happen in the future, significant challenges remain. China's broader goal is to achieve AI sovereignty, enabling the nation to train and deploy advanced models entirely on domestic hardware. As domestic production ramps up, the reliance on foreign-made products may diminish, presenting a substantial risk for Nvidia and similar manufacturers.
As the competitive landscape continues to evolve, investors will need to monitor these developments closely, considering the potential impact on Nvidia stock and its future growth trajectory.
