Nvidia's Decline and Huawei's Ascent: The AI Chip War Heats Up

The U.S. semiconductor industry’s dominance faces a critical challenge as Huawei accelerates its AI chip production, directly undermining Nvidia’s market position in China. Recent developments, including the Trump administration’s export restrictions and Huawei’s aggressive product launches, have sent shockwaves through global tech markets. Nvidia’s stock price has plummeted 28% year-to-date, reflecting investor anxiety over lost revenue and rising competition. But is this a temporary setback or a harbinger of long-term structural shifts?

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The Trump administration’s 2025 export controls on advanced AI chips—specifically requiring licenses for sales of Nvidia’s H100 and H20 processors to China—have had an immediate financial toll. nvidia reported a $5.5 billion inventory write-down in its first fiscal quarter of 2025, acknowledging that its top-tier chips would likely remain blocked from China’s booming AI market. This market alone contributed $17 billion to Nvidia’s revenue in fiscal 2024, or 13% of its total. Analysts at Wedbush estimate this restriction could cost Nvidia up to $7 billion in annual revenue by 2026.

Meanwhile, Huawei has seized the opening. Its 910C chip, launched in April 2025, combines two 910B processors into a single package, delivering performance comparable to the H100. Mass production of the 910C began in April, with shipments already underway. This timing could not be worse for Nvidia: the 910C’s release directly coincides with the U.S. restrictions, enabling Huawei to fill the void in China’s AI infrastructure needs.

The stakes are rising further. Huawei’s next-generation Ascend 920 chip, expected later in 2025, aims to match the H20’s capabilities. While China’s Semiconductor Manufacturing International Corporation (SMIC) still faces yield challenges in producing advanced chips, the combination of U.S. trade barriers and Huawei’s rapid iteration has already altered investor sentiment. On April 21, the day reports of Huawei’s 910C shipments emerged, Nvidia’s stock fell 4.5% to $96.06—a stark contrast to its $452 peak in November 2023.

Analysts are divided on the long-term implications. Some, like Bernstein’s Stacy Rasgon, argue that U.S. restrictions have ceded China’s AI chip market to Huawei permanently. “Nvidia’s dominance there is over,” Rasgon stated, noting that domestic alternatives will now dictate China’s AI infrastructure. Others, however, highlight Nvidia’s broader ecosystem advantages, including its CUDA software platform, which remains unmatched. TipRanks data shows a $169.30 average price target for Nvidia—a 75% upside from its April lows—suggesting markets still bet on its recovery.

The critical question is whether Huawei’s chips can sustain high yields and scalability. SMIC’s 7nm process, while improved, still lags behind TSMC’s 5nm nodes, which power Nvidia’s H100. Yet geopolitical factors now outweigh purely technical ones: China’s state-backed chip initiatives and AI spending could insulate Huawei from these limitations. The U.S. trade war has created a perverse incentive—it has turned China’s semiconductor underdevelopment into a strategic asset by forcing reliance on domestic suppliers.

In conclusion, the immediate impact on Nvidia is clear: it has lost a major revenue stream and faces a credible competitor in its most important market. However, the broader narrative remains unresolved. While Huawei’s 2025 push has justified the stock’s decline, Nvidia’s software ecosystem and global AI adoption trends—outside China—could still underpin its long-term value. Investors must weigh short-term pain against the company’s resilience in a market where AI remains the growth engine. For now, the AI chip war is a reminder that geopolitics, not just technology, will shape the semiconductor industry’s future.