Nvidia Developing New AI Chip for China, Outperforming H20 Sources Say.

Nvidia is working on a new AI chip for China that outperforms its H20 chip. The company is the world leader in programmable graphics processors and develops associated software. Net sales break down into computing and networking solutions (77.8%) and graphics processors (22.2%). The new AI chip is expected to be a significant development for Nvidia and potentially disrupt the market.

NVIDIA Corporation (NVDA) has secured approval to sell its H20 artificial intelligence (AI) chips in China, marking a significant milestone for the company's growth prospects [1]. This development follows a deal with the U.S. government, which requires NVIDIA to pay 15% of total revenues from H20 sales in China to the U.S. government. While this revenue-sharing condition may slightly impact margins, the deal opens a valuable door to one of the largest AI markets globally.

NVIDIA's H20 chips are designed to meet U.S. export control rules while offering strong AI computing capabilities. China, a major consumer of advanced chips for applications in data centers, cloud computing, and AI development, is a crucial market for NVIDIA. The company had faced a sales setback in the region due to tightened U.S. restrictions on high-end chip exports. The latest approval will help NVIDIA re-enter the market legally and competitively.

The deal could help NVIDIA recover lost market share in China and boost its global revenue base. The AI boom in China, driven by large tech companies and government-backed projects, could create steady demand for H20 chips. Although the 15% revenue payment may weigh slightly on profitability, the larger volume of sales could offset that impact over time.

NVIDIA's new AI chip, expected to outperform its H20 chip, is anticipated to be a significant development for the company and potentially disrupt the market. The company is the world leader in programmable graphics processors and develops associated software. Net sales break down into computing and networking solutions (77.8%) and graphics processors (22.2%) [2]. The new AI chip is expected to enhance NVIDIA's position as a leader in AI chip technology.

NVIDIA's major competitors, Advanced Micro Devices (AMD) and Intel (INTC), are also stepping up their capabilities in the AI chip market. AMD is witnessing growing adoption for its MI300X GPUs, while Intel is focusing on both CPUs and AI accelerators to grab a market share in the data center space [1].

Shares of NVIDIA have risen around 36.4% year to date against the Zacks Computer and Technology sector's gain of 13% [1]. From a valuation standpoint, NVDA trades at a forward price-to-earnings ratio of 36.66, higher than the sector's average of 28 [1]. The Zacks Consensus Estimate for NVIDIA's fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 42.5% and 32.5%, respectively [1].

References:
[1] https://www.nasdaq.com/articles/nvidia-wins-china-sales-approval-will-h20-chip-deal-boost-growth
[2] NVIDIA Corporation (NVDA) : Free Stock Analysis Report