Nvidia’s H20 chips are poised to return to the Chinese market after a period of export restrictions. While this might seem like a significant win for the company, analysts are tempering expectations, predicting a substantial drop in Nvidia’s market share. The reasons for this are multifaceted, going beyond the temporary ban itself.
The resurgence of domestic Chinese AI chip manufacturers is a key factor. Companies like Huawei, Cambricon, and Hygon have capitalized on the absence of Nvidia’s high-end chips, gaining significant traction in the booming Chinese market. Bernstein, a leading equity research firm, forecasts Nvidia’s AI chip market share in China to plummet from 66% in 2024 to a mere 54% in 2025. This isn’t solely due to the export restrictions; it reflects the growing competitiveness of Chinese alternatives.
Bernstein’s report highlights the opportunity created by U.S. export controls for Chinese companies. Without the pressure of competing with the most advanced global chips, domestic players have flourished, leading to a projected surge in the localization ratio of China’s AI chip market from 17% in 2023 to a staggering 55% by 2027. This paints a picture of a market where Nvidia, even with the return of its H20 chips, faces a significantly altered landscape.
While some analysts remain optimistic about Nvidia’s ability to regain some ground, the consensus points to a considerable loss of market share. Customers who switched to Chinese rivals during the ban may not easily revert, and the ongoing development of advanced Chinese chips could further erode demand for Nvidia’s offerings. This underscores the long-term impact of the export controls, extending beyond the immediate disruption of supply.
Adding another layer of complexity is the increased scrutiny from Beijing. Nvidia recently faced questioning from Chinese authorities regarding potential national security risks associated with its H20 chips, specifically the possibility of backdoors for access or control. This follows proposed U.S. legislation requiring similar security mechanisms in advanced AI chips, creating a delicate geopolitical balancing act.
This situation highlights the broader strategic implications of technology trade between the U.S. and China. While the easing of restrictions on Nvidia’s H20 chips represents a partial concession, it doesn’t signal a complete reversal of the trend towards technological decoupling. The ongoing development of Chinese AI technology, coupled with Beijing’s determination to foster domestic innovation, suggests that Nvidia’s dominance in the Chinese market may be a thing of the past, at least in its previous form. The future for Nvidia in China is certainly far from certain, and its ability to recapture its lost market share remains very much in question.
