Nvidia's China AI Chip Market Share to Fall to 54% in 2025: Bernstein

Nvidia's market share in China's AI chip market is expected to fall to 54% in 2025, down from 66% in 2024, according to Bernstein. This is due to regulatory challenges and the rise of domestic Chinese competitors like Huawei and Cambricon. Bernstein forecasts that the share of locally produced AI chips in China will increase dramatically to 55% by 2027.

Nvidia's market dominance in China's AI chip market is facing significant challenges. According to Bernstein analysts, Nvidia's market share is expected to decline to 54% in 2025 from 66% in 2024 [1]. This downward trend is primarily driven by regulatory hurdles and the rise of domestic competitors such as Huawei and Cambricon.

The regulatory environment in China has been particularly challenging for Nvidia. The U.S. export controls on high-end GPUs like the A100 and H100 forced Nvidia to pivot to the H20, a mid-tier chip designed to comply with U.S. export regulations [1]. However, the H20's approval in July 2025 has not resolved the regulatory scrutiny. Chinese authorities have raised concerns about alleged "backdoors" in the H20, which has led to a broader push for self-reliance in AI infrastructure [1].

The financial impact of these regulatory challenges has been significant. In Q1 2025, Nvidia reported a $2.5 billion revenue loss from China, with projections of an additional $8 billion in Q2 [1]. During this period, Chinese competitors like Huawei and Cambricon surged, capturing market share with homegrown alternatives [1]. Bernstein estimates that Nvidia's AI chip market share in China will fall from 66% in 2024 to 54% in 2025, while the localization ratio of China's AI chip market is expected to jump from 17% in 2023 to 55% by 2027 [1].

However, the resumption of H20 sales has injected optimism. Analysts at Stifel and Bernstein now project $19.5 billion in 2026 revenue from China, driven by pent-up demand and pre-ban orders from Alibaba, Baidu, and Tencent [1]. The H20's compatibility with existing data center infrastructure and Nvidia's CUDA software stack remain key differentiators. Yet, manufacturing constraints at TSMC pose a wildcard.

The competitive landscape in China is rapidly evolving. Huawei's Ascend 910C has gained traction in inference workloads and cloud services, while Cambricon's stock price has soared 400% in 12 months, reflecting investor confidence in its MLU370 series [1]. Hygon, another state-backed player, has announced support for DeepSeek's large language models, further cementing its role in China's AI ecosystem [1]. Despite these gains, Chinese chipmakers face hurdles such as lagging software ecosystems and subpar fabrication capabilities compared to TSMC [1].

For investors, the key question is whether Nvidia can reassert its dominance in China while mitigating geopolitical risks. The company's recent $500 billion investment in U.S.-based AI supercomputers signals a long-term bet on domestic manufacturing, but this strategy risks diluting its focus on China [1]. The H20's success will hinge on regulatory stability, competitive resilience, and supply chain reliability [1].

In conclusion, Nvidia's market share in China's AI chip market is expected to fall in 2025 due to regulatory challenges and the rise of domestic competitors. While the resumption of H20 sales has injected optimism, the road ahead remains uncertain and fraught with geopolitical risks. Investors must weigh the potential for short-term gains against the possibility of a prolonged decline in market share.

References:
[1] https://www.ainvest.com/news/nvidia-tenuous-entry-china-balancing-geopolitical-risk-ai-market-opportunity-2508/