How U.S. Sanctions Are Reshaping the AI Chip Market: Nvidia’s Challenges and China’s Rise
Nvidia holds a 78% market share of China's AI chip market, generating $13.26 billion in revenue in 2023 despite U.S. sanctions.
The Chinese AI chip market grew from $9 billion in 2021 to $17 billion in 2023 and is forecast to reach $62.5 billion by 2028.
Huawei’s Ascend 910C chip targets Nvidia’s H100, with over 70,000 units ordered by Chinese tech giants valued at $2 billion.
Starting in 2025, China’s AI chip market is projected to account for over 30% of global revenues, reflecting the rise of domestic innovation and competition.
U.S. sanctions have forced Nvidia to reduce GPU performance for Chinese markets, creating opportunities for domestic players to fill the gap.
Nvidia’s Q3 2025 Earnings Preview
As Nvidia prepares to announce its earnings on November 20, 2024, investors are closely watching for updates on its data center and AI chip segments, which have been key drivers of growth. Analysts expect another strong quarter, driven by sustained demand for AI chips in enterprise and data center applications. However, the impact of U.S. export sanctions limiting Nvidia’s ability to sell advanced GPUs to China remains a critical concern, according to my report “Mainland China’s Semiconductor and Equipment Markets: Analysis and Manufacturing Trends.”
The Impact of U.S. Sanctions on Nvidia and the Chinese AI Market
Since 2022, the United States has implemented a series of sanctions aimed at restricting China’s access to advanced semiconductors and AI chips, particularly those produced by leading companies like Nvidia. The stated objective of these measures is to prevent China from leveraging cutting-edge AI technologies in the development of nuclear and conventional weapons systems.
In response to these export bans, Chinese firms have sought alternative strategies to maintain access to critical semiconductor technologies. A notable workaround involved the use of cloud computing platforms. By turning to services like Amazon Web Services (AWS), Chinese entities were able to utilize Nvidia’s A100 and H100 chips remotely, which are vital for training sophisticated AI models.
While the sanctions effectively blocked the physical import of these advanced chips, cloud-based solutions allowed Chinese companies to continue progressing in AI development. Concurrently, the sanctions catalyzed a strategic shift within China, prompting the country to accelerate investments in its domestic semiconductor industry. This has led to a renewed focus on self-reliance and the rapid development of indigenous technologies to reduce dependency on foreign suppliers.
China’s AI Chip Market Dynamics
Nvidia has historically dominated the Chinese AI chip market, commanding significant market share with its A100 and H100 GPUs. These chips have become industry benchmarks for AI workloads. However, export restrictions forced Nvidia to introduce the H20 chip, a modified version of its flagship GPUs, specifically designed to comply with U.S. regulations. This performance reduction left room for domestic competitors to enter the market, backed by the Chinese government’s focus on technological self-sufficiency.
China’s AI chip market, valued at $17 billion in 2023, is one of the fastest-growing in the world. Table 1 provides a detailed breakdown of the key players in this market, showcasing Nvidia’s dominance while highlighting the rise of companies like Huawei, Biren Technology, and Moore Threads. Shuyuan Technology, a newer entrant, focuses on edge AI accelerators, positioning itself as a competitor to Nvidia’s Jetson Xavier NX in IoT and compact AI applications.
