The announcement that NVIDIA’s H20 AI chip ban was being lifted seemed like great news at first, but it comes with its own set of challenges. Jensen Huang, CEO of NVIDIA, revealed that the Trump administration would allow NVIDIA to sell H20 AI chips to China, with plans to initially tap into their existing inventory to meet the demand. However, the situation is more complicated than it appears. The AI chip market in China has been without access to NVIDIA’s high-end chips for quite some time, creating pent-up demand. But according to reports, NVIDIA and its suppliers are struggling to meet that demand due to issues in production.
Many of the fabs, particularly those of suppliers like TSMC, had shifted focus to other products after the export controls were implemented, and now they’re hesitating to restart production of the H20 AI chip. The demand for other chips is currently overwhelming, and the time it would take to get new production lines ready for the H20 chips means NVIDIA might not be able to capitalize on the opportunity for several quarters.
Despite the expectation that NVIDIA could see billions in revenue from China, the reality is a bit different. It’s anticipated that the company will rely heavily on its existing H20 chip inventory to fulfill orders. However, the market remains uncertain about the production of newer units. One potential strategy for NVIDIA could involve focusing on clearing out their inventory to recover losses from last quarter, then pivoting to introduce new AI solutions to the Chinese market. This includes chips like the B20 AI chip, RTX PRO 6000D, and the B30 AI chip, each targeting different sectors. By diversifying its offerings, NVIDIA could open new production lines and shift away from a sole reliance on the H20 chip. Although NVIDIA’s prospects in China are hopeful, the company is likely to face challenges, especially with the H20 chip production restart.