AI Hardware "Bullets With Frosting": China's Pros And Cons of Importing Nvidia AI Chips

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The US government aims to entice AI chip buyers from China with unrestricted Nvidia hardware, while Beijing is expected to impose export restrictions on the H200. The intent is to avoid dependence on US hardware.

Nvidia is allowed to export its H200 series AI chips to China again but still requires approval from Beijing. U.S. President Donald Trump announced on the social network "Truth Social" that the American chipmaker could sell this product to selected Chinese customers again. "25 percent will be paid to the United States of America," Trump added.

Shortly thereafter, the Financial Times reported in an exclusive article that the Chinese government might restrict the import of Nvidia chips. Beijing reportedly does not want to jeopardize the efforts of its domestic semiconductor industry to catch up technologically and develop its own powerful AI chips, according to the FT. The newspaper cited two unnamed sources.

China's Ministry of Industry and Information Technology and the top planning authority NDRC immediately convened a "crisis meeting behind closed doors" following the news from Washington, to which the country's largest private AI companies were also invited, reports the Chinese technology portal Kuai Keji. ByteDance, the owner of TikTok, Alibaba, and Tencent were present.

Computing Power from the USA

It remains to be seen whether and to what extent Beijing will allow its domestic companies to purchase H200 chips. The use of Nvidia chips in Chinese data centers, which are currently being built nationwide due to the rapid adoption of artificial intelligence in China, is highly controversial politically in Beijing.

There is a precedent for a negative decision by the communist state and party leadership against US chips. In August 2025, Nvidia CEO Jensen Huang, after extensive lobbying at the White House, received permission to export the "H20" chip, specially developed for the Chinese market, to the People's Republic. However, shortly thereafter, regulators in Beijing instructed domestic major companies to refrain from using Nvidia chips.

While the H20 had significantly reduced performance, the H200, now approved for export, is Nvidia's second most powerful AI chip. Only the Blackwell chips and the new Rubin series, both of which are still not permitted to be sold to China, are more powerful.

Alibaba, ByteDance, and other Chinese tech companies reportedly contacted Nvidia last week to express interest in large orders, Reuters reports.

Use Only Under Conditions

Most analysts in China assume that Beijing will approve the import of the H200 with conditions to not jeopardize the rapid development of the domestic AI technology stack. At the same time, the Chinese government is expected to stick to its strategy of replacing all US chips with domestic products as quickly as possible, according to the same experts.

It is too risky for China to remain dependent in the long term on the erratic decisions of the US President or the containment efforts of the China hawks in the US Congress, argue Chinese commentators.

The H200 chips are referred to as "sugar-coated bullets" (tang yi paodan) in several opinion articles. This term was used by Mao Zedong in March 1949 to warn against the seductive tactics of opposing "capitalists." This time, it implies that the continued use of Nvidia chips could solidify its market position in the Chinese semiconductor market and thereby slow the development of domestic chip companies.

910C As Equivalent Hardware from Domestic Production

The Chinese chip manufacturer Huawei has already developed AI chips that, while not yet fully matching the performance of Nvidia's H200, are not far behind. Currently, these Huawei chips, such as the 910C, cannot yet be produced in sufficient volumes to meet the high demand in China. According to press reports, Huawei plans to double production to around 600,000 units next year.

The Chinese semiconductor startup Moore Threads Technology is also catching up technologically at a rapid pace. The company's stock price temporarily soared by 425 percent after an IPO on the Shanghai Stock Exchange in early December 2025, as investors believe they have spotted the "Nvidia of China" in the company.

Even if Nvidia were to make a lot of money selling AI chips to China and the US government could actually fill part of its budget gaps with its 25 percent share, it is very likely to be only a temporary bonanza.

The back-and-forth of American chip boycotts, which Trump had to partially ease after Beijing's successful threat of export restrictions on rare earths, has already cost Nvidia most of its market share in China. In the fourth quarter of 2025, more than half of all AI chips in Chinese data centers were already domestically produced, Trendforce reports.

Nvidia, which still held a 95 percent share of the Chinese AI chip market in 2022, has already suffered greatly from Washington's "Chip War." Its business in China has "hit zero," Nvidia CEO Jensen Huang said in recent weeks. (sb)

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