Why The US Is Letting Nvidia Ship H20 AI Chips To China

Nvidia NVDA has filed applications with the U.S. government to resume shipments of its H20 AI chips to China and expects to receive the necessary licenses soon.

Citing Nvidia’s move, Reuters reported on Wednesday that White House National Economic Adviser Kevin Hassett indicated the decision by President Donald Trump and his team to allow the chips to be exported was aimed at preventing China from gaining a technological edge in the race to develop advanced semiconductors.

The H20 chips represent the most powerful AI hardware Nvidia can legally offer in China, Reuters cited Hassett’s statement to the Fox News Channel.

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However, these chips come with reduced computing capabilities compared to international versions, due to export restrictions first implemented during Trump’s presidency and later reinforced by former President Joe Biden.

Hassett suggested that the administration weighed the risk of China accelerating its domestic chip innovation if U.S. companies were barred from selling to the Chinese market.

By permitting the shipments, the administration aimed to preserve America’s lead in the global AI chip competition, Reuters noted.

The Financial Times also reported that the U.S. temporarily lifted certain technology export restrictions on China to maintain momentum in trade negotiations and support President Trump’s efforts to secure a meeting with Chinese President Xi Jinping.

Meanwhile, Nvidia reportedly adjusted its production strategy by placing a fresh order for 300,000 H20 AI chips with its primary manufacturing partner, Taiwan Semiconductor Manufacturing Co TSM, last week, a significant ramp-up in output for the H20 GPU.

Nvidia stock surged 31% year-to-date, gaining over 61% in the last three months as Big Tech giants aggressively upgrade their chip capabilities to meet the global demand for artificial intelligence and consolidate their positions.

On May 28, Nvidia posted strong first-quarter results, reporting revenue of $44.1 billion, up 69% year-over-year and ahead of the $43.2 billion Street estimate. Earnings reached 81 cents per share, though excluding a $4.5 billion charge tied to excess H20 chip inventory and China-related purchase obligations, adjusted EPS would have been 96 cents, topping varied analyst expectations.

Nvidia’s Data Center segment led the way with $39.1 billion in revenue, up 73% year-over-year. Gaming and AI PC revenue surged 42% to $3.8 billion, partly fueled by plans to power the upcoming Nintendo NTDOY Switch 2.

The company acknowledged the April 9 export ban on H20 AI chips to China had a significant impact, with $4.6 billion in H20 sales booked before the licensing rules changed. Looking ahead, Nvidia expects a second-quarter revenue of $45.0 billion, plus or minus 2%, factoring in an $8.0 billion hit from China’s export controls.

CEO Jensen Huang emphasized surging global demand for Nvidia’s AI platforms, calling its Blackwell NVL72 supercomputer a game-changer amid rising adoption of AI infrastructure worldwide.

NVDA Price Action: NVDA stock is trading higher by 0.48% to $176.35 premarket at last check Wednesday.

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