Nvidia's anticipated return to the Chinese AI chip market, valued at up to $50 billion annually, has hit a significant roadblock. Despite receiving a green light from former President Donald Trump in December, the company has not shipped a single H200 AI chip to China nearly two months later due to an ongoing U.S. government national security review.
The core issue lies in a bureaucratic clash within the U.S. administration. While the Commerce Department has relaxed some export rules, final license approvals require sign-off from the State, Defense, and Energy departments. The State Department is reportedly "making it very difficult," according to an insider, as it pushes for stricter limits due to concerns the advanced chips could be used by the Chinese military or intelligence services.
This delay has forced Nvidia to reverse its production strategy. Following the December deal, the company instructed suppliers to ramp up H200 chip manufacturing in anticipation of massive demand. With no orders materializing from Chinese buyers awaiting regulatory clarity, some suppliers have now paused production of H200 parts entirely.
The situation also ensnares rival AMD, whose MI325X chip is subject to the same approval process under the Trump-brokered deal. AMD CEO Lisa Su confirmed this week that the company has also not received approval to ship its chip to China.
The deal itself includes stringent conditions: the U.S. government would take a 25% cut of sales, half of all shipments must remain in the U.S., chips must be tested by U.S.-based third-party labs, and buyers must report detailed usage plans. Furthermore, Chinese companies must convince U.S. regulators the chips won't aid China's military—a major hurdle.
On the Chinese side, regulators in Beijing are considering granting limited access to companies like Alibaba and ByteDance but are waiting to see if the U.S. will issue any licenses at all. Even if approved, the chips cannot be used to build global data centers, limiting their utility and potentially pushing Chinese firms to seek alternatives or continue renting overseas server capacity.
