Nvidia's return to the Chinese market with its H20 AI chips, facilitated by a recent easing of U.S. export restrictions, is encountering significant resistance from Beijing. The U.S. government softened its stance in July by granting Nvidia export licenses, but the Chinese response has been far from welcoming, reflecting broader strategic shifts in tech geopolitics.

Although the U.S. granted export approval for Nvidia’s (NVDA) H20 chip to resume sales to China, Chinese authorities have discouraged local tech giants — including ByteDance, Alibaba (BABA), and Tencent (TCEHY) — from using the chips, especially in government and sensitive applications. The directive appears to be in place until a national security review is complete, signaling a firm regulatory posture.

Strategic Self-Reliance Over Convenience

This pushback reinforces China's commitment to artificial intelligence (AI) chip self-sufficiency. Despite Nvidia's technological lead, domestic producers continue to benefit from state backing and market protection. Regulators are clearly signaling that domestic AI and chipmakers must remain central to the technology ecosystem, even if foreign products offer superior performance. At the same time, Chinese regulators are scrutinizing potential security risks associated with the H20 chip — a reminder that geopolitical tension still looms.

The Trump administration’s decision to permit H20 exports comes with a notable caveat: Nvidia and Advanced Micro Devices (AMD) must surrender 15% of their China-related AI chip revenue to the U.S. government. This arrangement highlights how trade and technology policy has become a revenue stream as much as a security lever. 

The unorthodox move sparked criticism from law and policy experts, who argue that it could undermine foundational export control norms and pose constitutional challenges — with some even likening it to an indirect export tax. Still, it represents a rare alignment of trade leverage and strategic objectives.

Eyes on the Future: Blackwell Chips

Beyond the H20, President Trump has signaled openness to allowing reduced-performance versions of Nvidia's next-generation Blackwell AI chips into the Chinese market. These chips would need to be downgraded by roughly 30–50% to satisfy U.S. export rules. If finalized, the move could offer China access to significantly more powerful GPUs, albeit with truncated capabilities, while maintaining U.S. government control over technological risk. Revenue-sharing similar to the H20 deal may also apply.

Nvidia’s financial performance hinges on regaining its Chinese presence, which accounted for a sizable portion of its revenue before stricter bans hit earlier this year. While the H20 deal has reopened the door, increased oversight and waning confidence from Chinese clients mean Nvidia may face delays, muted demand, or shifting preferences toward local chipmakers.

Meanwhile, the U.S. government is reportedly exploring a strategic stake in Intel (INTC) to reinforce domestic semiconductor manufacturing. This deliberation follows stock gains and reflects a broader “America-first” push in tech infrastructure and supply chains.

Broader Geopolitical and Policy Implications

These developments underscore a broader recalibration of U.S.-China tech relations. The Biden administration’s sweeping export controls from 2022, built on coalition partnerships with allies, sought to limit China's access to advanced computing tools. The Trump-era reversals and revenue-sharing arrangements represent a more transactional model, and raise concerns about consistency and long-term policy credibility.

For Washington, the priority appears to be preserving technological leverage while capturing financial value. For Beijing, it’s maintaining regulatory control and nurturing homegrown innovation — even if that means competing with superior foreign technology.

Looking Ahead

If regulatory hurdles and geopolitical friction persist, the H20 chip’s market resumption could be delayed or significantly dampened. That could open a window for Chinese players like Huawei, which continue to ramp up AI GPU capabilities, but remain behind leading-edge standards for now.

In Washington, discussions around scaled-back Blackwell chips and government investments in domestic foundry capabilities underscore how global AI competition continues to shape trade policy, corporate strategy, and national security priorities.