Semiconductor giant Nvidia (NVDA) is facing new hurdles in China as regulators push for stricter energy standards, according to the Financial Times. The National Development and Reform Commission (NDRC) is urging Chinese firms to adopt chips that comply with its new environmental rules, which Nvidia’s H20 chip does not currently meet. As a result, major tech companies like Alibaba (BABA), ByteDance, and Tencent (TCEHY) are being subtly discouraged from purchasing these chips.
Notably, Nvidia’s H20 chips were specifically designed for export to China while remaining compliant with U.S. export restrictions. However, these new regulations could complicate its sales in the region.
Nvidia’s China Revenue Is at Risk
China is Nvidia’s fourth-largest market, contributing $17.1 billion in revenue and making up 13% of its total sales, according to its Fiscal 2025 annual report. Recently, Nvidia’s H20 AI chips have seen strong demand from Chinese firms, largely due to the rising popularity of DeepSeek’s AI models. In fact, analysts predict that Nvidia could have shipped up to 1 million H20 chips in 2024, as reported by Reuters.
If China enforces these energy rules strictly, Nvidia could lose a significant share of its revenue.
To address the issue, the company is working to arrange talks with Chinese officials in the coming months. Reports suggest Nvidia has a plan to tweak the H20 chip to meet the new NDRC’s standards. However, these technical changes could reduce the chip’s efficiency and hurt its competitiveness in the Chinese market.
Trade Tensions Add to the Pressure
Beyond environmental policies, Nvidia is already grappling with U.S.-China trade tensions. The United States has implemented tough export controls on advanced AI chips, including Nvidia’s, have restricted sales to China.
At the same time, Chinese regulators are urging domestic firms to invest in local semiconductor technologies. They aim to reduce reliance on foreign suppliers like Nvidia and bolster China’s self-sufficiency in critical tech sectors. This shift could further erode Nvidia’s market position in China.
With growing trade and new environmental rules, Nvidia faces a tough road ahead in one of its key markets.
Is Nvidia a Good Stock to Buy Now?
NVDA stock commands a Strong Buy consensus rating based on 39 Buys and three Hold ratings on TipRanks. Also, the average Nvidia price target of $176.54 implies 46.28% upside potential from current levels. Year-to-date, NVDA stock price has lost about 10%.
