Nvidia (NASDAQ:NVDA) is set to resume sales of its H20 chips in China following a policy shift by the Trump administration. Still, analysts warn that the company may not regain its previous market dominance due to growing domestic competition and regulatory hurdles.
In July, the Trump administration approved Nvidia’s request to sell its previously banned H20 chips to China and greenlit a new “fully compliant” version tailored for the market.
The decision came after Nvidia had flagged billions of dollars in potential losses tied to U.S. export controls, CNBC reported on Monday.
Also Read: China Questions Nvidia’s AI Chip As US Export Controls Stoke Tensions
However, analysts at Bernstein, as per CNBC, cautioned that Nvidia’s market share in China’s AI chip sector is likely to shrink. In a recent forecast, the firm projected that Nvidia’s share would decline from 66% in 2024 to 54% in 2025.
They attributed the drop to recent supply chain disruptions and aggressive gains by local Chinese chipmakers. Bernstein wrote that U.S. export controls have created a unique opportunity for domestic AI processor vendors, highlighting rising players like Huawei, Cambricon, and Hygon.
Bernstein also predicted that China’s AI chip localization ratio would soar from 17% in 2023 to 55% by 2027.
Bernstein’s projections also assume that current U.S. chip restrictions will largely remain unchanged, which could make it harder for Nvidia to compete with newer Chinese chips if U.S. offerings fall behind technologically.
Washington had imposed multiple semiconductor sanctions on China to restrict its access to sophisticated semiconductor technology, including artificial intelligence technology, citing national security threats.
The sanctions followed retaliation from China in the form of banning U.S. semiconductor access (including companies like Micron Technology (NASDAQ: MU)) to its market and backing of domestic firms (like Semiconductor Manufacturing International Corp and Huawei Corp) to develop their technology.
Despite the geopolitical headwinds, Nvidia’s stock has surged, gaining over 29% year-to-date and significantly outperforming the NASDAQ 100 Index.
This growth is fueled by the ongoing AI infrastructure boom, with tech titans such as Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL) aggressively increasing capital expenditures on data centers, servers, and networking.
Wedbush analyst Dan Ives has referred to this period as a “watershed moment,” while JPMorgan’s Samik Chatterjee noted that Meta plans nearly $100 billion in capex by 2026, Alphabet has raised its 2025 target to $85 billion, and Microsoft is on track to surpass $100 billion annually.
On the China-specific front, Needham analyst N. Quinn Bolton remains optimistic about Nvidia’s prospects. Following the U.S. export license approvals, Bolton expects upside for the company as it resumes H20 GPU shipments.
He projects quarterly H20 shipments of $3 billion, with the potential for nearly 100% gross margins on previously written-down inventory.
Bolton also anticipates strong demand for Nvidia’s forthcoming China-specific Blackwell GPU variants, estimating over $1 billion in preorders and forecasting a robust $20 billion in China data center sales by fiscal 2028.
NVDA Price Action: NVDA stock is trading higher by 1% to $175.45 premarket at last check Monday.
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