By the time NVIDIA disclosed in regulatory filings, the U.S. government imposed new licensing requirements on selling H20 chips to China, including in Hong Kong and Macau, and chipmakers had rolled up. The Trump administration’s decision will abruptly end the shipment of China-centric AI chips and hit the company with $5.5 billion in revenue due to unsold inventory.
For the world’s most valuable semiconductor companies and undisputed leaders in artificial intelligence chip manufacturing, this is not only a commercial disruption, but a geopolitical collision.
This moment represents a huge upgrade in the long-standing control of key technologies between the United States and China. Troubled Nvidia finds herself facing the limitations of doing business in two worlds.
AI Engine
Founded in 1993, NVIDIA was originally known for its graphics processing unit (GPU), which is increasingly video-based. But by the 2010s, its chips discovered new utilities far beyond gaming. The researchers found that NVIDIA’s parallel processing architecture was ideal for training large language models (LLMS), a breakthrough that transformed NVIDIA from gaming companies to backbone of AI Revolution.
The company’s H100 and A100 chips have become industry standards for training LLMs and running generated AI tasks. With AI data center chips estimated to have market share of more than 80%, NVIDIA has fueled the rise of companies such as OpenAI, Anthropic and Google DeepMind.
Nvidia’s bargaining chips have also been used by Chinese companies such as Tencent and Alibaba, and have built their own AI systems. China has accounted for a large part of Nvidia’s business over the years. One fifth of revenue in 2023, or $17 billion, comes from chip sales from Chinese companies. The business has become even more tense as tensions grow between Washington and Beijing.
In 2022, the Biden administration began to tighten export controls on advanced semiconductors with national security concerns, with its wonderful goal of preventing U.S. technology from achieving China’s military ambitions, including autonomous weapon systems, surveillance tools and cyber warfare capabilities.
NVIDIA’s response was to slow down its performance by using hardware and software tweaks and specifically build new H20 chips to create a “downgraded” version of its flagship chip. These chips are designed specifically for China, allowing Nvidia to maintain its market foothold while technically complying with US restrictions.
Now, this workaround seems to be closed. The latest move by the Trump administration requires NVIDIA to obtain licenses to sell these downgraded AI chips. The new rules also impacted Advanced Micro Devices (AMDs), which were only weeks after U.S. lawmakers urged the White House to stop using NVIDIA products by Chinese tech companies, fearing that the chips were stocked by companies linked to the Chinese military.
Currently, nearly $16 billion worth of H20 chips are being exported to Chinese tech giants including Alibaba, Beast and Tencent. The White House decision hit NVIDIA shares hard, triggering a sharp sell-off. However, long-term impact may be more important than temporary declines in valuations.
Black Swan Moment
At the heart of the new urgency is a Chinese company that seems to be nowhere to be found: DeepSeek. In January, it released an AI inference model called DeepSeek R1, which claims that the model received only $6 million in training, a fraction of the cost associated with OpenAI’s O1 inference model, such as Openai’s O1 inference model.
What really shocked American officials was how deep it was done. According to a U.S. Congress investigation, DeepSeek reportedly acquired tens of thousands of NVIDIA GPUs through intermediaries through Singapore and technologies such as distillation, which allegedly include proprietary OpenAI data to quickly develop its model. Analysts estimate that the company can use up to 60,000 chips, some of which should be subject to restrictions under U.S. export laws.
The report also shows that some of DeepSeek researchers have links to Chinese military agencies, including defense laboratories related to nuclear weapons development and organizations approved by the U.S. government. These connections deepen doubt that the rapid rise of DeepSeek is not only a technical story, but a strategic threat.
The Trump administration’s response is not only directed against NVIDIA and AMD, but also considers wider penalties for DeepSeek, including blacklisting from access to U.S. technology and services that may be restricted to U.S. citizens and entities.
For Nvidia, these developments are a survival test of its global business model. The company has been working hard to comply with U.S. law for years while still selling it to China, the world’s second largest AI market. However, with the increase in restrictions and political censorship, this balancing act becomes impossible.
NVIDIA is now facing a future that must actively return to domestic and allied markets. It has pledged $500 billion to invest in U.S. AI infrastructure, including opening a server manufacturing plant in Houston and working with chip packaging companies in Arizona.
Still, the company’s China evacuation will have lasting consequences. Analysts warn that if NVIDIA retreats, Chinese companies such as Huawei can fill the gap. Huawei is already developing its own AI chips that will soon be able to provide a local alternative to Nvidia’s dominance. Losing market share in China will not only negatively affect NVIDIA’s financial performance, but also pose a potential threat to the potential threat to building global competitors.
The way forward
In Washington, the suppression has bipartisan support. The Chinese Communist Party’s House Select Committee has conducted its first investigation into NVIDIA’s sales in Asia, demanding detailed records of thousands of chip deals.
Meanwhile, Commerce Secretary Howard Lutnick has pledged to increase export control enforcement and announced that there will be a special, focused tariff type for semiconductors.
The meaning goes far beyond Nvidia. ASML is a Dutch manufacturer of advanced chip manufacturing equipment, and AMD also felt the impact of the ripple effect. What is constantly evolving is a global reshaping of the semiconductor industry, which is driven by geopolitics like silicon.
For now, NVIDIA’s future will depend not only on its ability to continue innovating, but also on how it navigates the turbulent terrain of the U.S.-China race.
Companies that once simply made better graphics cards are now a symbol of the AI arms race and what happens when technology, business and geopolitical collide.
publishing – April 20, 2025 01:10 AM IST
