This article first appeared on GuruFocus.
A fresh momentum shift is building in China’s AI supply chainand it may spell long-term trouble for Nvidia (NASDAQ:NVDA). Alibaba (NYSE:BABA) is now testing domestic accelerators, Cambricon just posted blowout earnings, and upstart DeepSeek is already training models on Huawei hardware. Beijing, meanwhile, has shown little interest in letting Nvidia’s H20 chips regain traction. The subtext? China’s tech ecosystem could be moving past its reliance on imported silicon. What was once a policy talking point is now becoming a market reality.
To be clear, Nvidia still dominates the high end. The company’s H20 shipments to China hit roughly 1 million units this yearpossibly front-loaded before further US restrictions. But on-the-ground, local firms are adapting fast. Analysts expect Cambricon to ship 143,000 chips in 2024, while Huawei could produce up to 200,000 advanced units in 2025. Companies are learning how to run models on legacy hardwareand doing it well enough to meet domestic demand. That may be good enough for President Xi’s AI+ initiative, which prizes broad deployment over benchmark supremacy. Cambricon, however, issued a caution to investors, saying its stock had likely decoupled from its current fundamentals and warning of persistent supply-chain risks.
The big unknown is Washington. On its latest earnings call, Nvidia CEO Jensen Huang floated a real possibility that the US could allow sales of its upcoming Blackwell chips into Chinaa move that would dramatically raise the stakes. These GPUs outclass both H20s and their domestic peers, and could tempt Chinese buyers back if made available. For now, though, the tone has shifted. Between sanctions, policy nudges, and emerging domestic alternatives, Nvidia’s long-term hold on the China AI market looks less certain than ever.