Nvidia has put a halt on the production of its H20 AI chip amid growing tensions, particularly after Beijing encouraged Chinese firms to move away from US hardware due to security concerns.
This week, Nvidia instructed its suppliers, including Samsung Electronics and Amkor Technology, to stop production. This decision followed China’s intensified scrutiny on processors aimed at their market.
The company’s stock fell by 1.1% during early trading on Friday, marking another setback for Nvidia in its dealings with China, which accounted for $17 billion in revenue last year.
The suspension has raised questions about the demand for the H20 chip—an alternative to Nvidia’s main accelerator, which was intended to navigate around the US export restrictions while also benefiting from China’s market conditions.
In this shifting landscape, competitors like Huawei Technologies and Cambricon Technologies are positioning themselves to take advantage. In fact, Cambricon shares surged by 20% on Friday, boosting enthusiasm among local chip manufacturers.
This situation isn’t entirely new for Nvidia; it previously faced challenges regarding its $5.5 billion H20 stock when the Trump administration first imposed bans on its products.
Chinese regulators have increasingly advised businesses against using American chips, citing potential security risks. Nvidia’s CEO, Jensen Huang, expressed surprise at the recent actions, insisting that the H20 chip does not pose a risk.
“We’re in talks with them, but it’s a bit early to say what will happen,” Huang stated during an impromptu news conference in Taiwan, where he was discussing the upcoming Rubin chip with TSMC.
Both Nvidia and AMD recently received green lights from the US government to continue a limited sale of AI chips to China, albeit under strict conditions that require a portion of the revenue to go to the US government.
Nevertheless, China is pushing harder to decrease its reliance on American technology. This momentum was evident when the AI company Deepseek announced its latest model is designed for use with domestically-produced chips, though details remain scarce.
Meanwhile, reports indicate that the unfinished Nvidia chips are being processed at Amkor. The company acknowledged it has a considerable stockpile of H20 chips, but noted that the market situation is “very uncertain.”
Nvidia remains committed to managing its supply chain amid these fluctuating market conditions, maintaining that the H20 was intended strictly for commercial applications.
“As both governments understand, the H20 is not a military product nor for government infrastructure,” Nvidia emphasized.
Looking ahead, Nvidia aims to roll out a successor to the H20, but Huang highlighted that this will depend on approvals from future US administrations.
“Creating new products for AI data centers in China—it’s not solely up to us,” he remarked.
An analyst from Bloomberg Intelligence commented that this suspension introduces “fresh uncertainty.” They anticipate that Nvidia’s Chinese operations will recover, contingent on demand for their products.
Nvidia will soon release its financial results, which will shed light on how escalating trade tensions are affecting one of the world’s leading chipmakers.
A representative from Nvidia addressed cybersecurity concerns, asserting that the company doesn’t have “backdoors” in its chip that allow outside access. They assured that the H20 can be used with confidence in the market.
This report has reached out for comments from Samsung, Amkor, TSMC, Huawei, Cambricon, Deepseek, and the Chinese government.
