China’s efforts to restrict the use of Nvidia’s (NVDA) artificial intelligence (AI) chips were sparked by “insulting” remarks by U.S. Commerce Secretary Howard Lutnick, the Financial Times reported. “We don’t sell them our best stuff, not our second-best stuff, not even our third-best,” Lutnick told CNBC on July 15, the day after the Trump administration lifted export controls on Nvidia’s H20 chip sales.
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U.S. Official’s Remarks Sparked China’s Efforts to Restrict Nvidia’s H20 Orders
Lutnick further said that the U.S. wants to sell the Chinese “enough that their developers get addicted to the American technology stack, that’s the thinking.” Sources told the Financial Times that some of the Chinese senior leaders felt that the U.S. official’s statements were “insulting.”
A week after Lutnick’s comments, China’s internet regulator, Cyberspace Administration of China (CAC), issued a “window guidance,” an informal notice, to major tech companies like ByteDance and Alibaba (BABA), instructing them to pause orders for Nvidia’s H20 chips, citing security concerns. Consequently, several Chinese tech companies have paused or significantly reduced their orders for NVDA’s H20 chips.
Additionally, in recent years, Chinese regulators have encouraged tech companies to ramp up the use of domestic chips. However, tech giants, including Alibaba, have contended that their AI pursuits would be adversely impacted without Nvidia’s chips. That said, tech companies have reportedly become more open about transitioning to domestic chips, particularly for AI inference. This change in stance occurred especially after wider testing and adoption of chips from Chinese producers such as Huawei and Cambricon, following the Trump administration’s initial April ban on exports of Nvidia’s H20 processors.
Also, some Chinese tech companies have paused H20 orders as they await Nvidia’s launch of a China-specific Blackwell chip. This follows U.S. President Donald Trump’s statement that he could potentially allow a downgraded version of Nvidia’s Blackwell chip to be exported to China, in addition to H20 chips.
Is Nvidia Stock a Buy, Sell, or Hold?
Despite the ongoing uncertainties related to H20 chip sales to China, Wall Street remains bullish on Nvidia stock based on robust demand for its AI graphics processing units (GPUs). Ahead of the Q2 earnings on August 27, Nvidia stock scores a Strong Buy consensus rating based on 35 Buys, three Holds, and one Sell recommendation. Wall Street expects NVDA to report a 48% year-over-year growth in Q2 EPS to $1.01 and about a 53% jump in revenue to about $45.9 billion.
The average NVDA stock price target of $197.11 indicates 12.4% upside potential from current levels.
