Market will tell how Nvidia's AI chips will fare even as Washington loosens strings

United States President Donald Trump's decision to conditionally approve exports of Nvidia's advanced H200 artificial-intelligence semiconductors to China has drawn wide attention. But while the move reflects the eased bilateral trade tensions, two realities remain unchanged: China is an indispensable market for global AI-chipmakers, and Washington's high-tech export controls on China remain firmly in place.

China is one of the world's largest and most competitive AI markets. For Nvidia — whose revenues were unavoidably hit this year after sales of its H20 chips to China were restricted by the US administration — reentry into the Chinese market is vital for restoring its financial performance. Market logic, not geopolitics, explains why the US administration is willing to partially approve the H200 exports.

Yet this episode must be understood in the context of the 2025 US National Security Strategy, which places China at the center of Washington's long-term strategic planning with strengthened controls over advanced, dual-use technologies. Against this backdrop, the H200 approval is a narrow, transactional exception. The US continues to block shipments of Nvidia's most advanced Blackwell-series of processors to China, the architecture of restrictions remains intact and the strategic intentions remain unchanged.

For Washington, the approval of exports of Nvidia's H200 chips to China offers two practical benefits. First, it allows Nvidia to make billions of dollars in expected revenue in China. Second, if the H200 chip becomes popular in China, the US government stands to gain tangible benefits through export-licensing revenues. These motivations highlight that the approval is driven by commercial interests — not a shift in policy direction.

Whether the H200 will succeed in the Chinese market is, however, far from predetermined. When the H20 was allowed into China earlier this year, Nvidia's expectations were high. But Chinese market watchdogs subsequently identified multiple concerns, including energy-consumption inefficiency and potential security vulnerabilities.

As a result, many Chinese companies — especially those serving government, critical infrastructure and security-sensitive sectors — were reluctant to adopt the H20, as more and more competitive domestic alternatives are becoming available.

Like their domestic counterparts, foreign chips must meet China's regulatory requirements — for energy efficiency, environmental sustainability, data-security compliance and reliable, verifiable performance — and face the test of the market.

The H200's prospects will therefore depend on the market, not political decisions in Washington. If the chip meets China's strict but necessary market regulatory standards — areas where the H20 stumbled — it will be allowed to compete in the Chinese market. But if domestic AI chips outperform the H200 in computing power, price-performance balance or security assurance, then market competition will naturally direct demand toward Chinese-made solutions.

Foreign suppliers must recognize that China's semiconductor ecosystem has entered a new stage: open, but highly competitive; accessible, but strictly regulated; welcoming, but not dependent on any single foreign vendor. China remains willing to purchase foreign chips — but only if they are safe, efficient and aligned with its national development needs.

Thus, while the US administration's approval of exports of the H200 chip to China may temporarily steady the waters of Sino-US trade in the AI semiconductor sector, it does not alter the larger trend. The Chinese market will choose on the basis of performance, security and value. And in this era of rapid AI development, only those companies and technologies capable of meeting China's standards and the market's competition will secure a place.

The fundamental picture remains unchanged: The US continues to tighten its control of high-end technology exports, and China continues to strengthen its self-reliance in strategic sectors. The intersection of these forces will influence the future of the AI-chip sector. China's stance on Sino-US economic ties meanwhile remains consistent: The two sides should always strive for win-win results through pragmatic cooperation.