The AI Chip Thaw: Why Nvidia and AMD Are Set to Dominate China's $100B Opportunity

The recent U.S. approval of Nvidia's H20 and AMD's MI308 chips for sale in China marks a pivotal shift in the global AI hardware landscape. After years of trade tensions, the regulatory thaw signals a strategic realignment between Washington and Beijing—one that could unlock billions in pent-up demand for American chipmakers. For investors, this is no mere blip; it's a catalyst for revaluing Nvidia and AMD as critical gatekeepers to the AI infrastructure boom. Here's why the upside is now too compelling to ignore.

The Regulatory Thaw: More Than Just a Sales Permit

The approvals, finalized in early July -

- came after months of high-stakes diplomacy. U.S. policymakers reversed course on export controls, recognizing that China's AI market is too vast to exclude indefinitely. With half of the world's AI researchers based in China, as Nvidia CEO Jensen Huang emphasized, the move isn't just about sales—it's about maintaining American tech leadership. The timing is no accident: China's rare earth concessions and the U.S. lifting chip design software bans created a “trade truce” that now enables these chip sales.

For Nvidia, the H20's revival is a lifeline. The chip's prior $5.5B inventory write-off in 2023 and potential $15B in lost sales loom as missed opportunities. The resumption of shipments could now recoup a portion of those losses and fuel a Q3 earnings surprise. AMD, too, stands to benefit, with its MI308's $800M write-off erased as sales resume. Both companies now face a surge in demand from Chinese firms like ByteDance and Tencent, which have been starved of cutting-edge AI hardware.

The Financial Uptick: Q3 as a Tipping Point

The immediate win is clear:

Both stocks rallied 8-10% in pre-approval trading, reflecting market optimism. But the real prize lies in China's AI infrastructure spend, projected to hit $100B by 2027. Nvidia's H20 and AMD's MI308 are positioned to dominate this market.

Consider the H20's industrial AI play. Nvidia's RTX Pro variant, designed for China's regulatory environment, targets smart factories and logistics via digital twin applications. This isn't just about selling chips—it's about embedding American tech into China's manufacturing backbone. Competitors like Huawei's Ascend chips face hurdles due to U.S. HBM memory controls, giving Nvidia an edge in high-performance computing.

Long-Term Dominance: Why China Can't Opt Out

Despite U.S. concerns about military misuse, China's private sector has little incentive to rely solely on domestic alternatives. Local firms like Alibaba and DeepSeek are developing world-class AI models, but their scale-up hinges on access to U.S. hardware. China's data center utilization rates—often below 20%—highlight overcapacity, but that's a problem of investment, not just export controls. The reality is that Chinese companies will pay for U.S. chips to avoid being left behind in AI adoption.

Risks? Yes. But the Upside Outweighs Them

Critics point to lingering U.S. restrictions on advanced chips like Nvidia's Blackwell series, potential volume caps, and the unpredictability of trade policies. Yet these risks are overblown compared to the opportunity. The H20 and MI308 approvals set a precedent: the U.S. is prioritizing market access over stifling China's AI ambitions. Even if future restrictions emerge, the H20/MI308 are already in demand for near-term projects. Meanwhile, China's reliance on U.S. AI infrastructure creates a feedback loop—every chip sold deepens American tech firms' moats.

Investment Thesis: Position Now Before Q3 Earnings

The Q3 earnings reports will be the first test. Analysts project Nvidia's data center revenue could jump 15-20% on H20 sales, while AMD's AI segment could see a 30% boost. Investors should capitalize on current valuations, which still underprice this tailwind.

Historically, earnings beat expectations have driven positive returns for both stocks. Nvidia's performance after such events has been particularly robust: a 70% win rate over 30 days and a maximum 2.25% single-day gain highlight its consistency. AMD, while also gaining, exhibits more volatility—its 50% 30-day win rate and 1.51% peak return underscore the importance of timing. This data reinforces the thesis: Nvidia's ecosystem dominance and smoother post-earnings performance make it the clearer buy, while AMD's upside remains tied to server market dynamics.

Investors should avoid overreacting to near-term noise. Even if U.S. regulators rein in future models, the H20/MI308 approvals are a done deal—one that's already reigniting demand. This isn't just a recovery; it's a revaluation.

Final Take

The regulatory thaw isn't a temporary fix—it's a strategic pivot. For investors, the message is clear: the AI infrastructure boom is real, and U.S. chipmakers are its architects. With China's market open again, Nvidia and AMD are positioned to deliver years of growth. The time to act is now, before Q3 earnings crystallize this revaluation.