NVIDIA's H200 Approval: A Strategic Win Amid Geopolitical Uncertainty

The U.S. government's recent approval of NVIDIA's H200 AI chip exports to China, under a 25% revenue-sharing agreement, marks a pivotal shift in the U.S.-China tech rivalry. This decision, announced by President Donald Trump, aims to balance national security concerns with the need to sustain American leadership in AI innovation. While the move opens a critical revenue stream for NVIDIA, it also introduces complex geopolitical and financial dynamics that will shape the company's long-term resilience.

Strategic Implications of the H200 Approval

The H200 chip, though not NVIDIA's most advanced offering (the Blackwell and Rubin series remain restricted), represents a significant technological leap over China's current domestic capabilities. According to Reuters, the U.S. government's 25% revenue cut is designed to ensure that American interests are protected while allowing Chinese firms access to cutting-edge AI infrastructure. This arrangement mirrors similar conditions for competitors like AMD and Intel, creating a level playing field in the Chinese market.

For NVIDIA, the approval could add $2 billion to $5 billion in annual revenue, depending on shipment volumes and Beijing's regulatory hurdles. Prior to Biden-era export restrictions, China accounted for 20–25% of NVIDIA's data-center sales, and reinstating H200 exports offers a path to recapturing lost market share. However, the 25% tax will directly impact gross and net margins. With NVIDIA's gross margins near 70%, the tax could reduce profitability by approximately 17–20% on these sales, though the company's strong pricing power and high-margin profile provide a buffer.

Competitive Dynamics: AMD and Intel in the Crosshairs

The U.S. policy shift extends to AMD and Intel, both of which face the same 25% revenue-sharing requirement. This creates a more competitive environment in China, where NVIDIA has historically dominated the AI chip market. AMD's MI300 platform, however, is gaining traction in data centers and hyperscaler deployments, offering a viable alternative to NVIDIA's offerings. Intel, meanwhile, struggles with manufacturing bottlenecks and limited AI GPU visibility, putting it at a disadvantage despite its strong CPU market position.

China's push for self-reliance further complicates the landscape. State directives now prioritize domestic alternatives, such as Huawei's Ascend and Alibaba's Hanguang 800, which are being deployed in government and state-owned enterprises. While NVIDIA's H200 remains more advanced, Beijing's regulatory barriers-such as requiring companies to justify the use of foreign chips-could limit adoption. This underscores the fragility of NVIDIA's China revenue projections, even as the U.S. government seeks to stabilize access.

Geopolitical Risks and Long-Term Resilience

Despite the strategic benefits of the H200 approval, NVIDIA's exposure to U.S.-China tensions remains a critical risk. China's recent restrictions on H200 purchases, including a cumbersome approval process, highlight the government's intent to accelerate domestic chip development. In Q3 2025, NVIDIA reported only $50 million in H20 chip sales to China, far below analyst expectations, signaling the challenges of navigating Beijing's regulatory environment.

Moreover, the U.S. maintains an export ban on NVIDIA's Blackwell and Rubin chips, which are critical for next-generation AI workloads. This restriction could erode NVIDIA's competitive edge over time, as China advances its own AI capabilities. However, the H200 approval reinforces NVIDIA's role as the global standard for AI infrastructure, even in a constrained market. The company's $500 billion order backlog through 2026 and robust demand for its Blackwell chips in other regions provide a strong foundation for long-term growth.

Conclusion: A Calculated Bet on AI Leadership

NVIDIA's H200 approval is a strategic win that aligns with broader U.S. goals of maintaining technological dominance while mitigating security risks. The 25% tax and China's domestic push introduce margin pressures and regulatory uncertainties, but NVIDIA's financial strength, product leadership, and global demand for AI infrastructure position it to weather these challenges. For investors, the key will be monitoring how effectively NVIDIA navigates Beijing's restrictions and whether the U.S. government relaxes export controls on more advanced chips in the future. In the AI arms race, NVIDIA's resilience hinges on its ability to adapt to a rapidly shifting geopolitical landscape.