When Nvidia CEO Jensen Huang initially told the Financial Times that China would “win the AI race” before softening his stance, it crystallized a predicament that had been building for years. The world’s most valuable chipmaker now finds itself caught between two superpowers wielding a ban on Nvidia AI chips as a weapon in a broader technological cold war. And the company’s attempts to satisfy both parties will ultimately satisfy neither.
From control to zero: market collapse
The numbers tell a grim story. Speaking at a Citadel Securities event in October, Huang revealed that Nvidia’s share of China’s AI accelerator market has collapsed from about 95% to zero, and that the company now projects no revenue from China. This is not just a revenue issue. China previously accounted for 20% to 25% of Nvidia’s data center revenue, with the segment generating more than $41 billion in its latest financial results.
The latest blow came this week when sources claimed the White House told federal agencies it would not allow Nvidia to sell its latest scaled-down AI chips to China, specifically the B30A chip designed to train large-scale language models. Even though Nvidia has provided samples to Chinese customers and is reportedly working on design changes, the Trump administration is taking a hard line.
But Washington’s restrictions are only half of Nvidia’s problem. The Chinese government has issued guidelines requiring new state-funded data center projects to use only domestically produced AI chips, and ordered projects with less than 30% completion rates to remove all foreign chips or cancel plans to purchase them.
This is a pincer move that NVIDIA has virtually no control over.
Lobbying: Too much, too late?
Mr. Huang has long argued that maintaining China’s dependence on American hardware is in America’s interests. What’s his logic? Attracting Chinese AI developers to Nvidia’s ecosystem helps America maintain its technological influence.
After a meeting with President Trump in July, Huang’s lobbying efforts appeared to be working, with Washington agreeing to ease some chip restrictions under a plan in which NVIDIA and AMD would pay 15% of their China revenue to the U.S. government.
It turns out that optimism didn’t last long. The Chinese government then banned Nvidia from the market through a national security review of its chips, and Huang said the company’s market share dropped to zero. The irony of this is obvious. While Mr. Huang lobbied Washington to allow more sales to China, the Chinese government was simultaneously building barriers to keep Nvidia out.
The fundamental tension in Nvidia’s position became clear when Mr. Huang contrasted China’s pro-industrial energy subsidies with what he called excessive Western regulation. The company needs favorable policies from both capitals, but it operates in an environment where pleasing one increasingly means antagonizing the other.
The cost of technological nationalism
This isn’t just a corporate problem; it’s reshaping the global AI landscape. Even if a deal is reached that would allow sales of advanced chips to China to resume, China’s ban would exclude foreign chip makers like Nvidia from a large portion of the market.
Meanwhile, Chinese companies have poured over $100 billion of state funds into AI data center projects since 2021, creating a large captive market for domestic substitutes.
The caning policy has real implications. Highly anticipated trade talks following Trump’s meeting with Chinese President Xi Jinping failed to yield any concessions from either side on chip policy, with senior U.S. officials pushing back against Trump’s initial consideration of Huang’s request to allow the sale of new AI chips to China.
A spokesperson for NVIDIA told Reuters that the latest restrictions represent “zero share of China’s highly competitive data center computing market and are not included in our guidance.” It is a public admission of defeat wrapped up in corporate speeches.
China’s calculated response
Beijing’s moves reveal a strategy that goes beyond simple retaliation. China this year touted new data centers equipped exclusively with domestic AI chips while discouraging local tech giants from purchasing advanced NVIDIA chips, citing security concerns. The message is clear. Foreign dependence is a vulnerability that should be eliminated, not managed.
The Chinese government is carving out market share for domestic chipmakers, from Huawei to smaller companies like Shanghai-listed Cambricon and startups like MetaX, Moore Thread and Enframe.
These companies struggle to match Nvidia’s performance and software ecosystem, but they have exactly what they need most: time, money, and a protected market to mature.
impossible balance
Nvidia’s plight reveals a broader truth about technology in an era of great power competition. In other words, the middle ground is being lost. Companies can optimize for U.S. national security priorities or China’s market access priorities, but it is becoming impossible to prioritize both.
Fan expressed concern that Western countries were being held back by “cynicism” and overregulation, and contrasted this with China’s energy subsidies aimed at reducing costs for local developers who use domestically produced chips. But this comparison is beside the point.
The question is not whether China’s industrial policy is more effective, but whether Nvidia can operate in an environment where technology has become inseparable from geopolitics. The story of the B30A shows that technical compromises are futile.
Even chips intentionally disabled to comply with U.S. export controls are not approved by the U.S. government, while the Chinese government increasingly views any foreign-made chips as a strategic vulnerability. Nvidia could design a thousand variants, each weaker than the last, and still be locked out of any capital.
What happens next?
In the short term, NVIDIA faces a harsh reality. The company currently assumes 0% revenue from China in all its forecasts, and Huang said, “If something happens in China, that would be a bonus.” While this conservative guidance protects the stock price, it signals that management does not foresee a short-term solution.
The real question is whether this represents a temporary freeze or a permanent fracture. While the move could boost sales of domestically developed chips, it also risks widening the gap in AI computing capabilities between the U.S. and China as U.S. tech giants continue to spend hundreds of billions of dollars on data centers powered by Nvidia’s cutting-edge chips.
For Nvidia, the path forward could include increasing its commitment to markets where geopolitics aligns with its business: the United States, Europe, and friendly Asian countries. The Chinese dream appears to be over, at least in its previous form. Mr. Huang’s softening of his statement that “China will win” reflects this new reality. The US may not win by keeping China dependent on its own chips, but Nvidia is caught in the middle and will surely lose.
The ban on Nvidia AI chips is a two-pronged measure that goes beyond export controls and industrial policy. This is proof that there are no neutral suppliers in the AI race. Technology companies will increasingly be forced to choose sides, and hesitant companies will be forced to choose for themselves.
It took just a few months for Nvidia to plummet from 95% market share to zero in China. The question now is whether the U.S. and Chinese governments will leave any room for global technology companies to operate.
(Photo credit: OpenAI and Nvidia plan $100 billion chip deal for the future of AI)
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