Nvidia is reportedly preparing to launch a lower-cost AI chip specifically for China, in response to ongoing U.S. export restrictions that have barred the company from selling its high-end models in the region, according to a Reuters report published May 26. Mass production of the new chip is expected to begin in June, and it will be part of Nvidia’s latest generation of artificial intelligence hardware.
The chip is designed with simplified specifications to comply with U.S. regulations, and will sell for an estimated $6,500 to $8,000 significantly less than the now-restricted H20 model, which sold for between $10,000 and $12,000. 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, an Nvidia spokesperson told Reuters.
China remains critical to Nvidia’s bottom line
Despite regulatory hurdles, China remains a vital market for Nvidia, contributing 13% of total revenue in the last fiscal year. But U.S. sanctions have taken a toll: CEO Jensen Huang revealed that Nvidia’s market share in China has dropped from 95% before 2022 to around 50% today. We will continue to make tremendous efforts to optimize compliant products and continue serving the Chinese market, Huang said in a recent interview on Taiwanese television.
This marks Nvidia’s third attempt to develop a China-compliant chip. The latest model is designed to stay within U.S.-imposed limits, specifically capping bandwidth at 1.7 terabytes per second to avoid classification as a restricted high-performance computing device.
Competitive pressures and earnings on deck
Nvidia’s main domestic rival in China, Huawei, is ramping up production of its Ascend 910D AI chip, further intensifying the battle for market share amid the regulatory shuffle.
The timing of the news is notable, coming just ahead of Nvidia’s Q1 earnings report on May 28. Wall Street analysts expect strong performance, forecasting $43.4 billion in quarterly revenue a 66% increase year-over-year—and $21.3 billion in adjusted net income, according to Investopedia.
With growing pressure from U.S. export controls and rising competition in Asia, Nvidia’s push to create tailored AI chips for China highlights its determination to stay relevant in one of the world’s largest data centre markets. As the company adapts its hardware to comply with policy, all eyes are now on how its next-generation chips—and upcoming earnings—will land with investors.
