Chinese authorities have warned local companies against using Nvidia’s (NVDA) H20 artificial intelligence (AI) chips, mainly for government-related work, Bloomberg reported, citing people familiar with the matter. This move by Beijing could impact Nvidia’s efforts to regain lost sales from its H20 chip shipments, as the Trump administration decided to lift export restrictions and recently granted licenses to the semiconductor giant.
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The news of warnings against the use of H20 chips comes as U.S. President Donald Trump suggested that he might allow Nvidia to offer a scaled-down version of its next-generation advanced GPU (graphics processing unit), Blackwell, to China, despite growing criticism that Beijing could leverage U.S. AI capabilities for military purposes.
China Advises Against the Use of Nvidia’s H20 Chips
The Bloomberg report mentioned that over the past few weeks, Chinese authorities have sent notices to several firms urging them not to use the less-advanced chips. The guidance issued by Beijing particularly cautioned against the use of Nvidia’s H20 processors for any government or national security-related purposes by state enterprises or private companies.
In addition to Nvidia, Chinese authorities reportedly warned about AI chips from Advanced Micro Devices (AMD), though it’s unclear whether any letters specifically mentioned the company’s MI308 semiconductors. Both Nvidia and AMD recently secured licenses to resume lower-end AI chip sales to China on the controversial and unprecedented condition that they will pay the U.S. government 15% of their chip sales to Beijing. Given this new guidance from China, Nvidia and AMD could find it difficult to revive their sales in this key market.
The notices come as several Chinese state media reports questioned the security and reliability of H20 chips. Chinese officials are worried that Nvidia chips could have location-tracking and remote shutdown capabilities. However, Nvidia has repeatedly denied these allegations, stating that “the H20 is not a military product or for government infrastructure.” Nvidia contends that China has enough supply of domestic chips to meet its needs and “won’t and never has relied on American chips for government operations.”
Aside from security concerns, China is also urging local firms to avoid Nvidia chips to encourage the use of domestic chips and shift away from Western processors.
Is Nvidia Stock a Good Buy?
Despite the ongoing challenges related to sales of chips to China, Wall Street is bullish on Nvidia stock due to robust demand for its GPUs (graphics processing units) amid the ongoing AI wave.
The Strong Buy consensus rating on Nvidia stock is based on 35 Buys, three Holds, and one Sell recommendation. The average NVDA stock price target of $187.57 indicates 3.03% upside potential. NVDA stock has risen about 36% year-to-date.
