Nvidia's Comeback in China Faces Challenges Amid Rising Domestic Competition and Regulatory Hurdles

Nvidia is set to resume sales of its H20 chips in China following a policy shift by the Trump administration. However, analysts warn that the company may not regain its previous market dominance due to growing domestic competition and regulatory hurdles. Bernstein predicts that Nvidia's share in China's AI chip sector will decline from 66% in 2024 to 54% in 2025, attributing the drop to supply chain disruptions and aggressive gains by local Chinese chipmakers.

Nvidia (NVDA) is set to resume sales of its H20 chips in China following a policy shift by the Trump administration. The resumption of sales comes after the U.S. government lifted a ban on the chips, citing potential billions of dollars in losses for Nvidia. However, analysts warn that Nvidia may not regain its previous market dominance due to growing domestic competition and regulatory hurdles.

In July 2025, the Trump administration approved Nvidia’s request to sell its previously banned H20 chips to China and greenlit a new “fully compliant” version tailored for the market. This decision was made after Nvidia flagged billions of dollars in potential losses tied to U.S. export controls [1].

Despite the policy shift, Bernstein analysts predict that Nvidia’s market share in China’s AI chip sector will decline from 66% in 2024 to 54% in 2025. The drop is attributed to recent supply chain disruptions and aggressive gains by local Chinese chipmakers. Bernstein also projects that China’s AI chip localization ratio will soar from 17% in 2023 to 55% by 2027 [1].

The resumption of H20 chip sales in China is expected to boost Nvidia’s revenue in the region. However, the company faces risks from rising Chinese competitors like Huawei and Cambricon. The U.S. export restrictions have accelerated China’s AI chip localization efforts, making it harder for Nvidia to compete with newer Chinese chips if U.S. offerings fall behind technologically [3].

While Nvidia’s stock has surged, gaining over 29% year-to-date and significantly outperforming the NASDAQ 100 Index, analysts remain cautious about the company’s long-term prospects in China. Investors must balance short-term H20 demand with long-term risks from geopolitical tensions, supply chain constraints, and China’s self-reliance push.

References:
[1] https://www.benzinga.com/markets/tech/25/08/46824951/rising-competition-in-china-threatens-nvidias-comeback
[2] https://www.newsweek.com/donald-trump-china-ai-race-2107655
[3] https://www.ainvest.com/news/nvidia-tenuous-entry-china-balancing-geopolitical-risk-ai-market-opportunity-2508/