Nvidia Prepares Cheaper AI Chips for China Amid U.S. Curbs

Nvidia Plans Cheaper AI Chips for China Amid U.S. Export Restrictions: Report

Nvidia is reportedly preparing to roll out a lower-cost artificial intelligence (AI) chip for the Chinese market, a strategic move aimed at maintaining its foothold despite tightening U.S. export restrictions.

According to a May 26 report by Reuters, citing sources familiar with the matter, Nvidia plans to begin mass production of the new chip in June. The yet-to-be-named chip is part of the company’s latest generation of AI processors but comes with reduced specifications and simpler manufacturing — enabling a price point between $6,500 and $8,000.

That’s notably cheaper than Nvidia’s previously restricted H20 AI chip, which had sold for between $10,000 and $12,000 before it was swept up in recent U.S. export controls.

Struggling to Keep China’s $50 Billion Market

China represents a critical market for Nvidia, accounting for roughly 13% of its sales over the past financial year. But that position has been severely challenged by Washington’s clampdown on advanced chip exports to China, aimed at curbing the country’s access to cutting-edge supercomputing technology.

In April, the U.S. government informed Nvidia that export licenses would be required to ship the powerful H20 chips to China, citing national security concerns. Specifically, U.S. officials feared the technology could be “used in, or diverted to, a supercomputer in China.”

As a result, Nvidia’s market share in China has sharply declined — dropping from 95% before 2022 (when initial restrictions hit) to just 50% today, according to CEO Jensen Huang.

Jensen Huang on Taiwanese TV. Source: Yahoo/TVBS 

“We will continue to make tremendous efforts to optimize compliant products and continue serving the Chinese market,” Huang told Taiwanese television last week.

Third Attempt at a China-Compliant AI Chip

This marks Nvidia’s third attempt to design a chip tailored to U.S. export regulations. The new chip is specifically engineered to meet the current bandwidth cap of 1.7 terabytes per second imposed by U.S. authorities, Reuters reported.

However, an Nvidia spokesperson told Reuters that the company is still weighing its limited options: “Until we settle on a new product design and receive approval from the U.S. government, we are effectively foreclosed from China’s $50 billion data center market.”

Meanwhile, Nvidia’s main Chinese competitor, Huawei, is preparing to ship its own next-generation AI chip, the Ascend 910D, signaling intensifying competition in China’s massive AI hardware sector.

Investors Eye Nvidia’s Upcoming Earnings

The news about the China-focused chip comes just days before Nvidia’s highly anticipated quarterly earnings report, scheduled for release on May 28.

After an extraordinary run, Nvidia’s stock closed last week down about 3%, snapping a four-week winning streak. Despite this dip, Wall Street remains optimistic.

According to Investopedia, analysts on average expect Nvidia to post $43.4 billion in quarterly revenue, up 66% year-over-year, with adjusted net income projected at $21.3 billion.

“We see upside … despite the loss of H20 sales to China,” noted analysts at Oppenheimer, suggesting that Nvidia’s broader global momentum may offset challenges in the Chinese market.

What’s Next?

As Nvidia works to maintain compliance and competitiveness in China, all eyes will be on how its latest chip designs perform under regulatory pressure — and whether they can fend off rivals like Huawei. With China representing a lucrative slice of the global AI market, the stakes for Nvidia couldn’t be higher.

Stay tuned for Nvidia’s earnings update on May 28, which is sure to offer fresh insights into how the chip giant is navigating both geopolitical and technological headwinds.