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NVIDIA (NVDA) has reportedly halted production of its H20 AI chip, specifically designed for the Chinese market to comply with stringent U.S. export controls, following security concerns raised by Beijing, according to The Information. The H20, less powerful than NVDA’s flagship AI chips, was a critical component of the company’s strategy to maintain its foothold in China. Recall that in mid-July, NVDA announced expectations to resume H20 sales to China after a U.S. export ban in April 2025 halted shipments, but no export licenses have been granted in the weeks since, leaving the company’s plans in limbo.

• The Chinese government, through its Cyberspace Administration of China, has expressed concerns over potential “backdoors” in the H20 chip that could enable remote access or control, prompting Beijing to instruct major tech firms like Tencent, ByteDance, and Alibaba (BABA) to suspend purchases pending a national security review. NVDA CEO Jensen Huang has firmly denied these allegations, stating in Taipei that “there are no backdoors” in the H20 and emphasizing that the chip is not intended for military or government infrastructure use.
• Prior to the April export restrictions, the H20 was a significant revenue driver in China, NVDA’s second-largest market. The company incurred a $4.5 bln charge in Q1 due to unsellable H20 inventory and was unable to ship $2.5 bln in produced chips, with projections of an additional $8 bln in lost H20 sales for Q2, highlighting the severe financial impact of the restrictions and the urgency of resuming sales.
• Also today, Huang revealed that NVDA is in discussions with U.S. authorities to secure export licenses for a new chip, the B30A, based on the company’s advanced Blackwell architecture, intended for AI data centers in China. The B30A, while more powerful than the H20, operates at approximately half the speed of NVDA’s top-tier B300 chips, aligning with U.S. export control requirements to limit China’s access to cutting-edge AI technology. This move signals NVDA's intent to adapt its offerings to navigate the complex regulatory landscape while addressing China’s demand for AI infrastructure, though the chip’s approval remains uncertain.
• The potential launch of the B30A could help offset the substantial revenue losses from the H20 by providing Chinese customers with a compliant, higher-performance alternative for AI workloads. However, significant uncertainties persist, including whether Chinese regulators will accept the B30A given ongoing security concerns and whether the U.S. will grant export licenses, especially as geopolitical tensions and U.S. proposals for chip location-tracking systems fuel skepticism in Beijing.
• The lack of clarity on the B30A’s bill of materials, production timeline, and regulatory approval adds further risk, potentially disrupting NVDA’s supply chain and customer commitments in China if delays or rejections occur.

NVDA's business in China remains in flux as security concerns and halted H20 production create headwinds, with the proposed B30A chip offering a potential lifeline contingent on regulatory approvals. This uncertainty casts a shadow over the company’s outlook as investors await its pivotal Q2 earnings report on August 27, which will likely provide further insight into the financial impact and strategic path forward.