Nvidia Is Back on Track in China. Here’s What You Need to Know.

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Over the last few years, I’ve noticed an impressive growth trajectory for Nvidia (NVDA), largely due to its commanding presence in the worldwide artificial intelligence (AI) chip industry. This tech giant specializes in creating some of the most potent AI chips available, and businesses of all sizes have been eagerly seeking these resources to drive their AI projects. Consequently, this demand has propelled revenue growth by double and triple digits, with sales also demonstrating a high level of profitability. Unsurprisingly, Nvidia’s stock has skyrocketed an astonishing 980% over the past three years.

In recent developments, one significant challenge has arisen for this market leader: a challenge causing it billions in losses during the most recent quarter. This issue stems from the halt in its exports to China due to U.S. restrictions on advanced AI chips. Consequently, Nvidia had to account for these unsold chips, which made up 13% of its total sales last year, and risks losing this market entirely.

This week, the company shared exciting updates: The U.S. has given assurance to Nvidia for re-obtaining the license to market its H20 chip in China once more, and Nvidia also declared plans to introduce a new chip that complies with U.S. regulations.

It looks like Nvidia is back on track in this major market — here’s what you need to know.

U.S. controls on chip exports

Let’s analyze the broader context of the Nvidia-China situation. In 2022, the U.S. imposed export restrictions due to worries about China potentially utilizing advanced technology for building weapons of mass destruction. As a consequence, American companies were barred from exporting their premium chips there, and could only sell ones that adhered to specific conditions. Later, Nvidia developed the H20, a graphics processing unit (GPU) complying with these guidelines, and sold it to Chinese customers until this spring when the U.S. further tightened the rules.

In simple terms, the United States issued a letter to Nvidia stating that they would require a license to export their products to China, which had never been granted before, making the future seem challenging. As a result, Nvidia reported a $4.5 billion loss in the recent quarter due to unsold H20 products destined for China and is considering ways to re-enter the market. Additionally, they are no longer providing earnings guidance for China as the situation remains unclear.

Recently, Nvidia, led by Jensen Huang, has revealed its intention to resume selling the H20 product in China, following approvals from both Washington D.C. and Beijing. The company has been assured that necessary licenses will be granted in the United States. They plan to begin deliveries very soon. Additionally, Nvidia has unveiled a new chip, the RTX PRO GPU, which is compliant with regulations and is particularly effective for digital twin AI applications, a popular choice among factory operations.

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An AI market that could reach $50 billion

Last year, the United States accounted for approximately 47% of Nvidia’s total sales, making it their largest market. However, even without considering China, the growth prospects for this chip designer appeared promising. Despite representing only around 13% of sales, the Chinese market should not be underestimated as growth in this region could significantly enhance overall growth. According to Huang, the AI market in China alone is projected to reach around $50 billion over the next few years.

Concurrently, having a presence in China grants Nvidia the chance to continue its worldwide dominance in AI technology. If Nvidia were barred from China, it could potentially fall behind local competitor Huawei, who might not only take the lead in China but also disrupt Nvidia’s standing in other global markets. Although Huawei poses competition, access to the Chinese market enables Nvidia to compete effectively instead of ceding the opportunity to others.

Based on Nvidia’s ongoing innovation, there’s good reason to expect this company will maintain its leading position. Despite some limitations in technology delivery to China, customers in this region have consistently preferred Nvidia chips. This strong brand reputation and Nvidia’s commitment to designing products tailored for China could help sustain their success.

The implication here is that Nvidia’s potential sales to China could amount to billions of dollars, further strengthening its global presence. This development bodes well not only for the company but also for investors, potentially driving stock price increases both immediately and in the long term as this growth narrative unfolds.

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2025-07-17 19:49