Is Nvidia (NVDA) Still the AI Dominator Amid Rising Competition and Key China Chip Shipments?

The global AI chip market is undergoing a seismic shift as U.S. export policies evolve and Chinese tech giants accelerate their push for self-sufficiency. For investors, the question of whether Nvidia (NVDA) retains its dominant position in this high-stakes arena hinges on two critical factors: the resumption of H200 GPU shipments to China and the rapid advancement of domestic alternatives like Alibaba's newly developed AI inference chip.

Alibaba's AI Chip Ambitions: A Direct Challenge to Nvidia

Alibaba's semiconductor unit, T-Head, has made significant strides in 2025 with the development of a domestically manufactured AI inference chip designed to rival Nvidia's H20 GPU. This chip, which is being tested in China, boasts 96 GB of HBM2e memory and a 700 GB/s chip-to-chip interconnect-specifications Alibaba claims match the H20's performance. The company has also emphasized CUDA compatibility, a strategic move to lower the barrier for developers accustomed to Nvidia's ecosystem.

While Alibaba's PPU (a name not explicitly disclosed in the data) is already being deployed at scale-China Unicom has installed 16,384 units in its Qinghai facility-the lack of independent benchmarks and software validation leaves room for skepticism about real-world performance according to reports. However, the symbolic and strategic significance of Alibaba reducing reliance on TSMC for fabrication cannot be overstated. This aligns with broader Chinese efforts to insulate its AI infrastructure from U.S. export controls, a trend that could erode Nvidia's long-term market share.

The H200 Resurgence: A Short-Term Tailwind for Nvidia

Nvidia's H200 GPU, a high-performance chip for AI training and inference, is set to resume shipments to China in mid-February 2026, with initial orders ranging from 5,000 to 10,000 chip modules. This marks a policy reversal under the Trump administration, which now allows such sales with a 25% fee-a stark contrast to the Biden-era restrictions.

The H200's appeal in China is clear: it offers six times the performance of the H20, a chip explicitly designed for the Chinese market according to reports. Major players like Alibaba and ByteDance have expressed strong interest, though the Chinese government may impose conditions, such as bundling H200 purchases with domestic chips, to protect nascent local industries according to analysts. For Nvidia, this represents a short-term revenue boost, but the long-term outlook is clouded by the very competition its clients are now investing in.

The Broader Ecosystem: AMD's MI308 and Huawei's Struggles

Nvidia is not the only U.S. player vying for China's AI market. AMD is nearing a commercial rollout of its China-compliant MI308 AI chip, with Alibaba reportedly planning to purchase 40,000 to 50,000 units. This diversification of supply options for Chinese firms could dilute Nvidia's pricing power.

Meanwhile, Huawei's AI chip roadmap lags significantly. According to industry analysis, its next-generation chips won't reach H200-level performance until Q4 2027, and its current offerings are only 60% as effective as the H100. This gap underscores the continued relevance of U.S. chips for high-end AI workloads in China, at least in the near term.

Is Nvidia Still a Compelling Buy?

For investors, the calculus remains nuanced. Short-term optimism is justified by the H200's return to China and the chip's unmatched performance in critical AI applications according to reports. However, long-term risks are mounting:
1. Domestic competition like Alibaba's PPU and Huawei's incremental progress could capture market share as China's self-sufficiency goals crystallize according to analysts.
2. Regulatory uncertainty persists, with the Chinese government likely to impose conditions on foreign chip purchases according to reports.
3. AMD's entry introduces pricing pressure, particularly if the MI308 gains traction according to industry reports.

That said, Nvidia's ecosystem advantages-CUDA compatibility, software tools, and developer inertia-remain formidable barriers to entry for rivals according to industry analysis. Alibaba's PPU, for instance, still lacks independent validation, and Huawei's chips remain years behind. For now, the H200's performance edge and the lack of viable alternatives for high-end AI training ensure Nvidia retains a critical role in China's AI infrastructure.

Conclusion: A Tenuous Dominance

Nvidia's position as the AI dominator is far from unassailable, but it remains a compelling buy for investors with a medium-term horizon. The resumption of H200 shipments provides immediate revenue tailwinds, while the company's ecosystem dominance offers a buffer against emerging competition. However, the rapid advancement of Chinese alternatives and the geopolitical volatility of the market mean investors must remain vigilant. For now, Nvidia's crown is intact-but the challengers are closing in.