China Requests Avoidance of NVIDIA H20 Chips: A New Phase in US-China Tech Friction
In August 2025, reports that Chinese authorities had requested domestic companies to avoid using NVIDIA's H20 AI processors shook global markets. This move came immediately after the US reached an agreement with NVIDIA and AMD to impose a "Revenue Split" as a condition for exporting semiconductors to China. While semiconductor friction between the US and China has been ongoing for some time, this latest development signals a new round of maneuvering involving both "national security" and "economic interests."
In this article, we will analyze the background, impact, and future outlook from multiple perspectives to decipher the challenges faced by related companies and investors.
1. Overview of the Case and Immediate Reactions
1-1. The US-China Agreement That Triggered the Situation
Under the Trump administration, the US government reached a deal with NVIDIA and AMD to allow the export of AI accelerators to China in exchange for returning a certain percentage of revenue to the US government. The specific percentage is reported to be 15-20%, a measure effectively turning export controls into a "paid licensing" system.
1-2. China's Response
According to Bloomberg, Chinese internet regulators have "requested" that major tech companies refrain from placing new orders for H20 chips. While it is unclear if this constitutes a de facto import ban, it has been pointed out that the request may have been communicated to major firms such as Tencent and ByteDance.
1-3. Initial Market Reaction
Immediately following the announcement, NVIDIA stock fluctuated, but recovered somewhat by the end of trading. The impact spread to AMD and related semiconductor stocks, but the overall decline was limited.
2. Background of US-China Technology Friction
2-1. National Security and Technological Hegemony
The US has classified AI semiconductors as "dual-use technology" and has strengthened export controls to prevent China from using them for military purposes or to enhance its cyber operation capabilities. High-performance GPUs like the H100 and A100 are specifically targeted, and the H20 is a "downgraded version for China" designed to circumvent these regulations.
2-2. China's Domestic Production Strategy
Under the "Made in China 2025" strategy, China is promoting the domestic production of semiconductors. It is using state funds to support domestic manufacturers such as Huawei and SMIC, but it is estimated that there is still a gap of several years before they can achieve AI computing performance comparable to the H20 class.
2-3. Rare Earths and Interdependence
China leads the world in refining capacity for rare earths, which are essential for semiconductor production, and can use this as a bargaining chip. While the US is seeking to reduce its dependence, a complete substitution is difficult in the short term.
3. Impact on Related Companies
3-1. NVIDIA
Short-term: Sales to China are estimated to be in the billions of dollars, so a complete halt would be a blow to performance. However, a shift to other markets such as the Middle East is also underway.
Medium-term: Through the Revenue Split with the US government, the company secures a way to avoid export restrictions and maintain a certain level of access to the Chinese market.
Long-term: While reducing dependence on the Chinese market, there is a view that overall sales can be maintained through increased demand from domestic and allied nations.
3-2. AMD
Although its share in the Chinese market is smaller than NVIDIA's, sales of the MI300 series to China are strategically important. If this agreement is also applied to AMD, competitive conditions will be somewhat balanced.
3-3. Chinese Companies (Huawei, ByteDance, etc.)
Accelerating the adoption of domestic AI chips (such as the Ascend 910B).
Potential for delays in training large-scale generative AI models due to a shortage of high-performance GPUs.
4. Risks and Opportunities from an Investor Perspective
4-1. Increase in Political Risk Premium
As US-China friction drags on, semiconductor stocks have become hypersensitive to political news. Increased volatility is expected in short-term trading.
4-2. Long-term Growth Potential of the AI Market
Global demand for generative AI and cloud AI infrastructure continues to expand. The prevailing view is that even if the Chinese market is partially closed, it can be absorbed by increased demand in other regions.
4-3. Emergence of Alternative Supply Chain Stocks
Semiconductor companies in Taiwan, South Korea, and Japan, as well as stocks related to new data center investments in the Middle East and Southeast Asia, are attracting attention.
5. Future Scenarios
5-1. Cooperative Path Scenario
A pattern where export conditions stabilize between the US and China, and China continues to use US-made GPUs on a limited basis. Continued limited exports of the H20 and its successor models.
5-2. Escalating Conflict Scenario
China completely excludes US-made AI chips and rapidly advances domestic production. US companies take a short-term hit but accelerate their shift to other regions.
5-3. Technological Decoupling Fixation Scenario
AI infrastructure and semiconductor architectures separate into US and Chinese spheres. Polarization of the software market due to reduced compatibility.
6. Expert Comments
Scott Ladner (CIO, Horizon Investments): "President Trump is a transactional commercial leader, and companies are trying to continue business while gauging 'acceptable terms.'"
Nancy Tengler (CIO, Laffer Tengler Investments): "They won't completely abandon the Chinese market, and will ultimately find a middle ground."
7. Summary
China's request to avoid the H20 is not merely a decision on technology procurement, but part of the political, economic, and technological hegemony struggle between the US and China. The US government's new 'revenue split' approach is an attempt to build a 'toll bridge' between export controls and market access, but judging by China's reaction, that bridge is still shaky.
For investors and corporate executives, what is important is to build strategies based on this uncertainty and to identify growth markets while factoring in geopolitical risks.
