The race between the U.S. and China to develop artificial intelligence has intensified the battle for hardware and computing power as Chinese companies such as Huawei overtake global industry leaders such as Nvidia in their home markets.
Jensen Huang, CEO of computer chip giant Nvidia, was mauled by onlookers when he went out on the street for “zhajiang noodles” while visiting Beijing during the May summit between US President Donald Trump and Chinese President Xi Jinping. But his celebrity status hasn’t translated into success in selling Nvidia’s advanced chips in China.
Sales of Nvidia’s advanced H200 AI chip in the country were initially held back by restrictions imposed by the U.S. government on the export of advanced technology due to national security concerns. By the time President Trump agreed to the sale and secured a stay of execution for Huang, the Chinese government had switched to encouraging the use of domestically designed chips made by local rivals led by Huawei.
Huang acknowledged that the United States has lost its dominance in China’s advanced AI chip market as Chinese competitors have become “giants.”
“Well, we’ve been in China for 30 years, and before export controls prohibited Nvidia from exporting from China, we had about 95% market share. So we were competing just fine,” he said in a recent interview with The Associated Press.
“First and foremost, we need to ensure our national security and protect our nation, but at the same time we need to compete, grow our technology industry and maximize our exports,” he said.
Huawei leads among Chinese chipmakers
Since the U.S. barred Huawei, and then China in general, from purchasing the world’s most powerful computer chips and chip-making machinery in 2019, Chinese semiconductor makers have been rushing to become self-sufficient and develop their own chips and know-how.
Santa Clara, Calif.-based Nvidia and its main rival Advanced Micro Devices (AMD) dominate the U.S. AI chip space and much of the global market, but Huawei is making big inroads in China as Chinese AI companies like DeepSeek push to improve chip performance and cost-effectiveness.
A report by Bernstein, a global equity research and securities firm, estimates that Nvidia will have a market share of about 40% in China’s AI chip market by 2025, roughly on par with Huawei. Bernstein expects Nvidia’s market share to shrink to about 8% this year, while Huawei’s share will grow to about 50%.
Antonia Humaidi of the Mercator China Institute, which specializes in semiconductors, said Nvidia is “clearly losing significant ground to Huawei, which is (currently) the leader in the country.”
According to industry analysts, Huawei’s most advanced commercial AI chips, the Ascend 950 series, can, by some measures, be considered roughly comparable to Nvidia’s H200, which is considered by the industry to be one of Nvidia’s most powerful products.
“China now believes in its own self-sufficiency and supply capabilities,” said He Hui, director of semiconductor research at research and advisory firm Omdia.
Last September, Huawei also announced that it was deploying some of the world’s most powerful AI computing clusters, combining the power of thousands of chips, similar to its global rivals, even though it had to rely on Chinese-made semiconductors due to U.S. export restrictions.
Asked at a recent event how Huawei’s chip technology compares with competitors, including those in the United States, He Tingbo, head of Huawei’s semiconductor business, said: “We have found a pretty good solution.”
“Who can walk faster? Huawei or other companies? I don’t know the answer,” she says. “I guess time will tell.”
Nvidia remains essential to China’s AI
The semiconductor supply chain is global, and no single country can build advanced AI chips alone.
Rui Ma, founder of Tech Buzz China, said that when it comes to AI chips, demand still exceeds the available supply in China.
Several recent incidents involving the smuggling of Nvidia’s AI chips into China to circumvent export restrictions demonstrate the company’s appetite for technology.
Nvidia designs the world’s most powerful AI chips. Their production uses Dutch company ASML’s extreme ultraviolet lithography (EUV) machines, which rely on U.S. components and technology. Taiwanese semiconductor manufacturing giant TSMC uses these machines to make the majority of Nvidia’s top AI chips at its manufacturing plants.
China is banned from purchasing Nvidia’s most powerful AI and ASML chip-making EUV machines.
Huawei’s high-performance chips lag behind Nvidia’s cutting-edge technology in many areas. Analysts say China’s cutting-edge technologies, such as training AI models like DeepSeek, still rely on Nvidia AI chips.
Chinese universities and other big tech companies also want chips like the H200 as part of their research and development purposes.
NVIDIA’s global revenue continues to expand as demand for AI soars. Excluding data center computing revenue from China, the company expects revenue for the May-July period to be about $91 billion, up from about $82 billion in the previous quarter.
Nvidia’s most recent annual revenue was approximately $216 billion, while Huawei’s annual revenue for the same period was $126 billion.
Huawei is catching up
DeepSeek, a fast-growing Chinese rival to OpenAI’s ChatGPT and Anthropic’s Claude, said its latest V4 AI model, announced in April, is compatible with Huawei’s advanced Ascend chip.
Paul Triolo, partner at DGA-Albright Stonebridge Group, said “there will likely be significant efforts in collaboration between DeepSeek and Huawei” to train future DeepSeek models on domestic hardware.
This shows how Chinese chips have the potential to replace Nvidia chips, said Morningstar analyst Felix Li. But he added: “We don’t expect a sudden shift to[Huawei’s]Ascend.”
Nvidia designed the H20 chip to have less computing power so it could be sold to China without violating U.S. regulations. Brady Wang, a semiconductor analyst at Taipei-based Counterpoint Research, said the company was selling H20 chips in China until last year, but shipments were gradually declining.
The Chinese government’s official position on importing H200 chips is unclear, with NVIDIA stating that it does not sell H200 chips in China. At Nvidia’s recent shareholder meeting, Huang said, “We are not yet profitable and it is unclear whether we will be allowed to import into the country.”
Huawei also has global chip ambitions
Already the world’s largest supplier of communications network equipment, Huawei is expanding into global markets, and its chips are no exception.
The company says it operates in 170 countries and territories, with a mission to “bring digital to every person, home, and organization, enabling a fully connected and intelligent world.”
While there may be demand for Chinese chips in other countries, China’s production capacity for advanced chips remains below domestic demand.
Counterpoint’s Wang said China could gain market share in regions such as Southeast Asia as its advanced chip manufacturing capacity grows and prices become more competitive.
“China’s strategy of pursuing technology self-sufficiency and ultimately exporting technology is unlikely to change regardless of whether Nvidia is able to sell chips in China or not,” Wang said.
Hohim writes for The Associated Press.
