China Gives Nvidia The Cold Shoulder As Trump Reopens AI Chip Sales

In a stunning reversal of Washington’s years-long tech restrictions, President Donald Trump last month approved Nvidia to resume sales of a specialized AI chip, the H20, designed for China.

But instead of celebrating, Beijing responded with suspicion. Authorities have branded the chip a security risk, summoned Nvidia for explanations, and quietly discouraged Chinese firms from using it—despite years of lobbying the U.S. to ease export controls.

The frosty reception underscores Beijing’s drive for semiconductor self-sufficiency and its growing confidence in its homegrown chipmakers. At the same time, analysts say it’s also political theater. China still depends heavily on U.S. chips, even as Huawei and other domestic champions push closer to parity.

The Politics Behind the Chip

Nvidia’s H20, launched in 2024 to maintain a foothold in China despite Biden-era restrictions, was initially banned by Trump in April. Months later, he abruptly greenlit its sales, calling the chip “obsolete” compared to Nvidia’s cutting-edge processors like Blackwell and H100.

Trump’s move reflects a strategy voiced by Nvidia CEO Jensen Huang—that keeping China hooked on U.S. technology ensures long-term American dominance. “You want Chinese developers addicted to the American technology stack,” Commerce Secretary Howard Lutnick bluntly put it.

Yet the flip-flop has raised questions about Trump’s transactional approach to national security, once considered off-limits for bargaining.

China, meanwhile, has accused the U.S. of hypocrisy. Officials argue Washington is dumping outdated chips in China while blocking access to the truly advanced processors Beijing craves. “Do you really think we’re that naive?” said Xiang Ligang, a Beijing tech policy advisor.

Why Beijing Still Wants the Chip

Despite the backlash, Nvidia’s H20 is far from irrelevant. Bernstein Research estimates China could have imported 1.5 million units this year, worth about $23 billion, if restrictions hadn’t slowed shipments. Major buyers include ByteDance, Alibaba, and Tencent.

Huawei has made impressive strides, building AI chips that in some cases outperform the H20. But they still lag in memory bandwidth, a crucial factor powered by High Bandwidth Memory (HBM) technology. Chinese firms like CXMT remain years behind global leaders Samsung, SK Hynix, and Micron.

For now, Nvidia’s chips retain a strong edge, not just in hardware but in its integrated software ecosystem—a moat that makes it costly for developers to switch platforms.

China’s Rapid Catch-Up

Still, experts warn that underestimating Beijing would be a mistake. U.S. export controls have only fueled China’s determination to close the gap.

Bernstein projects that Chinese-made AI chips will surge from just 17% of domestic supply in 2023 to 55% by 2027, while U.S. suppliers’ share could collapse from 83% to 45%.

“The restrictions created a market that didn’t exist before and accelerated domestic substitution,” said analyst Qingyuan Lin.

Even Nvidia’s Huang has acknowledged China’s rise: “Huawei is one of the most formidable technology companies in the world… They’ve made enormous progress. China is right behind us. We’re very, very close.”

The Bigger Picture

For now, Washington still leads the AI race. But Beijing’s cool reception to Nvidia’s H20 signals a shift: China is preparing for a future where it doesn’t have to rely on American chips at all.

And in that future, U.S. policymakers may find they’ve accelerated the very competition they sought to restrain.