- China refused to buy H200 AI chips from Nvidia
- The move may be due to costs or security concerns.
- This comes after the failure of a personal intervention by Donald Trump.
Right now, there are two main players in the world of artificial intelligence (AI) hardware: Nvidia, which makes some of the most capable AI chips, and China, which has a burgeoning domestic industry that isn’t as reliant on Nvidia. US President Donald Trump attempted to change this and help Nvidia enter the Chinese market, but it appears his latest efforts have backfired spectacularly, potentially causing Nvidia to lose $30 billion in revenue.
Last week, the US Commerce Department approved the sale of Nvidia’s H200 AI chip to ten Chinese companies, including Alibaba and Tencent. This could have earned Nvidia between $15 billion and $20 billion at current prices, with financial analyst John Vinh saying Chinese demand is worth $30 billion, according to Moneywise.
Yet in a blow to Trump and Nvidia CEO Jensen Huang, the Chinese government has refused to approve chip purchases by its domestic industry. Trump and Huang had traveled for a meeting with Chinese President Xi Jinping in an effort to persuade him to allow sales of the H200 to continue. Instead, they walked away empty-handed, with Nvidia telling investors that its official market share in China is now effectively non-existent.
Speaking to reporters aboard Air Force One, Trump said of China: “They have a much higher standard than the H200. China needs it and yes, that happened. They chose not to buy because they want to develop their own. I think something could happen on that.”
In other words, China prefers to orient its AI industry around its own domestically manufactured chips rather than paying to use U.S. imports. And it seems there are several reasons for this.
Persistent IT chaos
One reason Chinese companies might not want to use U.S. AI chips, like those made by Nvidia, is that they have to pay significant fees for the privilege. Trump managed to create a deal where the US government will impose a 25% tariff on every chip Nvidia sells to China, thereby driving up the price for those foreign buyers.
But Beijing might be worried about something else. Since US law prohibits direct export fees, the chips must pass through US territory before being sent to China. And that has fueled fears in China that the chips could be tampered with — perhaps to install spyware, for example — before being sent abroad. This has led the Chinese government to turn inward and provide more support for its own domestic industry rather than foreign companies like Nvidia.
What does this mean to you? Well, we could see Chinese AI models like DeepSeek becoming increasingly optimized for Chinese hardware. This was already happening before the latest move – DeepSeek’s V4 update was optimized for Huawei’s Ascend chips rather than Nvidia’s, for example – but we might see more of it in the future. If you want to use these AI models, you might find yourself at a disadvantage when using a device with a chip from Nvidia, AMD, or Intel.
Beyond that, it demonstrates that the IT chaos caused by the AI boom is still in full swing. With component prices skyrocketing and uncertainty over future sales for Nvidia – currently one of the largest technology companies in the world – no one knows what will happen next.
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