Nvidia Struggles with China-Specific AI Chip Sales
Nvidia is reportedly struggling to sell its new, U.S.-approved lower-powered AI chips in the Chinese market. The situation has raised concerns that local Chinese AI chipmakers could gain market share and outflank American suppliers. Concurrently, Taiwan is emerging as an increasingly central hub for the American AI supply chain as U.S. firms accelerate investment there to mitigate geopolitical risk.
The U.S. implemented sweeping export controls on advanced AI chips to China in October 2022, tightening them a year later to restrict sales of lower-powered chips like Nvidia's A800 and H800, which were designed specifically for the Chinese market. These restrictions were expanded again in December 2024 to include high-bandwidth memory and other equipment. Nvidia's answer to the restrictions is the H20 chip, a further downgraded version of its powerful H100. While the H20's overall computing power is significantly lower than the H100, it possesses a superior memory configuration, making it over 20% faster in some specific large language model inference tasks. However, the H100 can still be theoretically over 6 times faster in other operations. Chinese tech giants are not waiting. Huawei's Ascend 910B, built on SMIC's 7nm process, is a direct competitor and surpasses Nvidia's A100 chip in performance. Alibaba's T-Head semiconductor unit has already shipped over 100,000 of its Zhenwu 810E chips, which reportedly perform at a similar level to Nvidia's H20. The competition is rapidly eroding Nvidia's dominance. In the first half of 2025, Nvidia held about 62% of the Chinese AI server market, with domestic chips capturing 35%. However, analysts predict Nvidia's share of China's AI processor market could plummet to just 8% in 2026, with Huawei projected to capture 50%. In a strategic countermove, the U.S. and Taiwan signed a landmark agreement in January 2026. The deal facilitates $250 billion in direct investment and an additional $250 billion in credit guarantees from Taiwanese tech firms to build and expand advanced semiconductor and AI production within the United States.
