TLDR
- Nvidia is developing a new AI chip called the B30A for China that would be more advanced than the current H20 model
- CEO Jensen Huang confirmed talks with U.S. government about selling the upgraded chip to China, but said it’s “too soon to know” the outcome
- Chinese officials reportedly found U.S. Commerce Secretary’s comments about not selling “best stuff” to China as insulting
- Nvidia asked some suppliers to halt H20 production while Chinese regulators discourage local firms from buying the chips
- Oppenheimer maintains Outperform rating with $200 price target ahead of earnings on August 27
Nvidia faces mounting challenges in China as the company works to develop new products for the world’s second-largest economy. The chipmaker is caught between U.S. export restrictions and Chinese regulatory pushback.
CEO Jensen Huang confirmed Friday that Nvidia is in talks with the U.S. government about selling a more advanced chip to China. The new product, called the B30A, would be an upgrade from the H20 chip currently approved for export.
“Offering a new product to China for the data center, AI data centers, the follow on to H20, that’s not our decision to make,” Huang told reporters in Taiwan. “It’s up to of course the United States government. And we are in dialogue with them. But it’s too soon to know.”
The H20 represents Nvidia’s attempt to comply with U.S. export controls while maintaining access to the Chinese market. The chip is a watered-down version of Nvidia’s flagship products, designed specifically for China.
Earlier this year, the U.S. government restricted H20 exports before approving them again in July. The approval came with strings attached – Nvidia must give 15% of its China chip sales to the U.S. government in exchange for export licenses.
Fresh Complications Emerge
Nvidia’s China strategy hit new snags this month when Chinese authorities raised security concerns about the company’s chips. Nvidia denied that its products contain “kill switches and backdoors.”
The situation worsened after U.S. Commerce Secretary Howard Lutnick’s comments in July. He said the U.S. doesn’t sell China “our best stuff, not our second best stuff, not even our third best.”
Chinese officials reportedly found these remarks insulting. Local regulators have since moved to discourage domestic companies from purchasing H20 chips.
The Financial Times reported that Chinese officials saw Lutnick’s comments as particularly offensive. This diplomatic misstep appears to have hardened Chinese opposition to Nvidia products.
Multiple reports this month suggest the Chinese government has actively urged local firms to avoid Nvidia chips. The company now faces pressure from both sides of the Pacific.
Production Adjustments and Market Response
Nvidia has responded to the uncertain Chinese market by asking some component suppliers to halt H20 production. This move suggests the company is reassessing demand for the China-specific chip.
The production pause comes as Nvidia weighs its options in a rapidly changing geopolitical landscape. The company originally created the H20 to maintain market access despite U.S. restrictions.
Huang has argued that allowing Nvidia to sell chips in China keeps Chinese AI development tied to American technology. Without U.S. chips, he warns, domestic companies like Huawei could fill the void.
Analyst Confidence Remains Strong
Despite China complications, Wall Street maintains faith in Nvidia’s prospects. Oppenheimer reiterated its Outperform rating with a $200 price target ahead of next week’s earnings.
The firm expects potential upside to consensus estimates for the fiscal second quarter. Analysts project sales of $45.8 billion and earnings per share of $1.00.
Oppenheimer notes that China represents less than 5% of sales in their model following earlier restrictions. The firm estimates an H20 backlog exceeding $16 billion when the previous ban took effect.
The analyst expects any government payments to be offset by price increases. Gross margins should remain in the mid-70% range for the foreseeable future.
Cloud service providers continue ramping Nvidia’s NVL72 rack-scale solution. The top four hyperscalers increased their 2025 capital expenditure to $365 billion, up from $325 billion.
Other analysts have also raised price targets recently. TD Cowen lifted its target to $235 from $175, while KeyBanc increased theirs to $215 from $190.
Nvidia shares closed Friday down 1.34% in premarket trading. The stock trades near its 52-week high of $184.48 as investors await Wednesday’s earnings report.
