In a strategic pivot to navigate tightening U.S. export restrictions, Nvidia is preparing to roll out a more affordable artificial intelligence (AI) chip tailored specifically for the Chinese market. According to a report from Reuters published on May 26, this new chip will go into mass production as early as June and is part of Nvidia’s ongoing effort to maintain a foothold in one of the world’s largest data center markets.
The new chip is expected to carry a price tag between $6,500 and $8,000 — significantly lower than Nvidia’s H20 model, which previously sold for around $10,000 to $12,000 before falling under U.S. export restrictions. While not as powerful as its higher-end counterparts, the upcoming chip is designed to comply with U.S. regulatory requirements, offering simplified specifications and reduced bandwidth that meet the 1.7 terabytes-per-second ceiling currently imposed by the U.S. government.
Nvidia confirmed it is actively exploring ways to remain competitive in China under these new constraints. “Until we settle on a new product design and receive approval from the U.S. government, we are effectively foreclosed from China’s $50 billion data center market,” a company spokesperson said, underlining the urgency of adapting to regulatory realities.
The importance of China to Nvidia’s business cannot be overstated. The country accounted for 13% of Nvidia’s total revenue in the last fiscal year, making it a key region despite geopolitical headwinds. These challenges have already taken a toll on the company’s market share in China, which Nvidia CEO Jensen Huang recently acknowledged had dropped from a commanding 95% in 2022 to just 50% today.
Still, Nvidia isn’t throwing in the towel. Speaking on Taiwanese television last week, Huang reiterated the company’s commitment to China, stating, “We will continue to make tremendous efforts to optimize compliant products and continue serving the Chinese market.” This upcoming chip marks Nvidia’s third attempt to create hardware that can legally be sold in China under U.S. guidelines.
The U.S. government has taken a firm stance on restricting advanced AI chips from reaching Chinese entities, citing national security concerns. Officials worry that such technology could be diverted for use in Chinese military supercomputers or surveillance infrastructure.
As Nvidia pushes ahead with its new design, competition in the region is heating up. Its primary Chinese rival, Huawei, is reportedly close to shipping its own AI chip — the Ascend 910D — as the two tech giants continue to battle for dominance in a constrained yet high-stakes market.
This latest development comes just ahead of Nvidia’s highly anticipated quarterly earnings release, scheduled for May 28. Investors are eager to see how the company is weathering the complex geopolitical landscape. Despite the loss of H20 chip sales to China, analysts remain optimistic. According to Investopedia, Nvidia is projected to post quarterly revenue of $43.4 billion — a staggering 66% increase year-over-year — along with an adjusted net income of $21.3 billion.
Oppenheimer analysts echoed this bullish sentiment, suggesting Nvidia’s innovative strategy and global demand for AI chips could offset losses from China: “We see upside … despite the loss of H20 sales to China.”
As Nvidia adapts to a rapidly evolving regulatory environment, its ability to innovate within constraints could prove crucial not only to its survival in China but to its ongoing leadership in the global AI race.
