Nvidia has unexpectedly landed at the center of a growing geopolitical and trade conflict between the United States and China. Facing mounting restrictions on exporting to one of its largest markets, the chipmaker responded by developing a scaled-down version of one of its products, known as the H20.
However, the U.S. government later imposed export restrictions on the H20 chips as well, barring Nvidia from selling them to Chinese customers. After months of regulatory back-and-forth, Nvidia secured permission to resume sales in China, but not without consequences. The company has already begun to cede market share to domestic competitors.
As reported by CNBC, the global equity research and brokerage firm Bernstein predicted that Nvidia"s AI chip market share in China would drop to 54 percent in 2025, a considerable decline from last year"s 66 percent.
Bernstein"s analysis is based on the assumption that the United States will not alter its current chip export policies toward China.
"U.S. export controls have created a unique opportunity for domestic AI processor vendors, as they are not competing with the most advanced global alternatives," Bernstein added. "The localization ratio of China"s AI chip market will surge from 17% in 2023 to 55% by 2027."
While the Chinese are facing growing hurdles in accessing Nvidia chips, they throw more weight behind local chip suppliers, including Huawei, Cambricon, and Hygon. David Sacks, the White House"s AI and crypto czar, already confirmed that the reason behind allowing Nvidia to resume selling H20 chips to China is to curb Huawei"s growth and dominance over China"s market.
"There is a compelling argument here that you just don"t want to hand Huawei the entire Chinese market when Nvidia is capable of competing for a big slice of it with a deprecated, less capable chip," Sacks said in an interview with Bloomberg"s Ed Ludlow.
Nvidia has recently come under scrutiny from Chinese regulators over allegations that its chips contain a backdoor. Nevertheless, China"s military still appears highly interested in acquiring Nvidia"s chips.