China Rethinks Trump’s Nvidia Chip Deal

The Nvidia chip deal between the United States and China is facing turbulence, with Beijing reportedly urging major tech firms such as ByteDance, Alibaba, and Tencent to suspend H20 chip orders. According to Bloomberg, Chinese authorities have been advising companies for weeks to avoid the chips due to fears of potential location-tracking and remote shutdown capabilities — claims Nvidia has denied.

The Cyberspace Administration of China (CAC) has also demanded companies justify purchasing H20 chips instead of local alternatives, such as Huawei Technologies’ Ascend series and Cambricon products. Reports indicate Beijing is investigating possible security risks and is determined to reduce dependency on US semiconductors.

Rising Security and Dependency Concerns

The Financial Times notes that Beijing’s approach reflects a broader policy to prioritize self-reliance in AI hardware. Officials are skeptical of US intentions, especially given comments from US Commerce Secretary Howard Lutnick that Washington’s strategy is to sell enough AI chips to make Chinese developers “addicted” to the American technology stack.

On July 15, Nvidia CEO Jensen Huang announced plans to resume H20 chip sales in China, but local pundits described the products as “poison wine” designed to erode domestic chipmakers’ competitiveness.

Trump’s Revenue-Sharing Arrangement

President Donald Trump recently revealed that the US government will receive a 15% revenue share from Nvidia’s H20 sales to China, down from the 20% he originally demanded. The same arrangement applies to AMD’s MI308 chips. Trump also said he might ask Nvidia to sell a downgraded Blackwell chip to China, with performance reduced by up to 50%.

Meanwhile, Reuters reported that Nvidia ordered 300,000 H20 chipsets worth around $3.6 billion from TSMC in late July, signaling its commitment to the Chinese market despite rising tensions.

Huawei’s Strategic Response

Huawei is accelerating its push to replace US chips with its Ascend series. Engineers are currently testing the Ascend 910B, which reportedly matches the H20’s 320 TFLOPs speed at 40% lower cost. Huawei aims to capture half of China’s AI computing market, strengthening its bargaining power in global semiconductor negotiations.

The company is also developing a complete AI ecosystem, including its MindSpore framework, Atlas computing platform, ModelArts development environment, and CANN — a heterogeneous computing architecture intended to rival Nvidia’s CUDA. On August 5, Huawei fully open-sourced CANN, marking a significant milestone in its strategy to break foreign monopolies in AI infrastructure.

Strategic Implications

This Nvidia chip deal controversy underscores the deepening US-China tech rivalry. While Washington seeks to profit from Chinese demand while limiting capabilities, Beijing is leveraging domestic innovation to cut reliance on American hardware. The outcome will likely shape the competitive landscape of the AI chip market for years to come.