The agreement between Nvidia and Washington allowed the company to resume sales of its H20 chip in China, marking a significant shift after months of restrictions. However, the Chinese authorities have started to intervene, asking major tech players like Alibaba, Bytedance, and Tencent to explain why they are purchasing the H20, rather than opting for domestic alternatives. This action signifies a rethinking of buying behaviors, coinciding with Beijing’s push for technological self-sufficiency .
Nvidia conceived the H20 chip as a response to export limitations set by the U.S. at the end of 2023. Initially celebrated, the H20 faced another blockade earlier this year due to renewed restrictions from Washington. Following negotiations, particularly under the Trump administration’s guidance, Nvidia was granted a license to resume sales in July 2025, conditional upon the company transferring 15% of revenue generated from some advanced chip sales back to China. This reengagement, however, has ignited debate in the U.S. regarding its potential impact on China’s tech capabilities.
A Historical Agreement That Now Faces Resistance
Chinese authorities, including the Ministry of Industry and Information Technology and the Cyberspace Administration of China , have held discussions with companies like Alibaba, Bytedance, Tencent, and Baidu . They have queried why these firms are not considering national alternatives to the H20, expressing explicit discontent towards its use in sensitive areas such as government infrastructure and cybersecurity. Questions regarding the data-sharing practices between Nvidia and Washington have also arisen, contributing to a climate of uncertainty among companies regarding their future orders for the H20.
The Chinese internet regulator further expressed concerns that the H20 chip might pose risks to user data due to possible “ backdoors ” and functionalities like remote shutdowns or location tracking. Nvidia has consistently denied these allegations, reiterating that the H20 is not intended for military or governmental use.
Since the initial restrictions on the H20, domestic manufacturers like Huawei and Cambricon have gained increased prominence in the chip market. Beijing’s emphasis on technological independence reinforces the government’s active encouragement for major tech platforms to choose local suppliers. The existing lack of access to advanced manufacturing equipment, especially top-tier lithography technology, remains a barrier, yet the demand for domestic chips is rising due to political backing and a desire to reduce reliance on foreign technology.
However, giants like Tencent, Alibaba, and Bytedance still prefer Nvidia’s GPUs due to their superior performance and the functionality of CUDA , Nvidia’s parallel programming platform. This reliance makes transitioning to alternative solutions, such as those offered by local manufacturers, technically challenging. Experts, including Li Guojie from the Chinese Academy of Sciences, argue that China requires proprietary solutions that can compete with or surpass CUDA in order to achieve true self-sufficiency .
Despite the advantages, major Chinese firms still favor Nvidia GPUs.
A recent analysis from Bernstein estimates that Nvidia’s market share in China might decrease from 66% in 2024 to 55% this year. Concurrently, political figures like Trump have hinted at potentially allowing a limited version of Nvidia’s Blackwell-based chips, which would add to the uncertainties surrounding the company’s future in this critical market. In 2022, Nvidia generated $17 billion in sales from China, accounting for 13% of its total revenue.
What began as a breakthrough for Nvidia in July has morphed into a landscape fraught with uncertainty. The increasing pressure from Beijing, alongside a growing preference for national manufacturers , recalibrates Nvidia’s prospects in a strategically vital market. The result will not only shape the company’s future in China but also influence how the two global powers navigate the complex intersections of artificial intelligence, politics, and trade going forward.
Images | Nvidia
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