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NVIDIA $NVDA to Retain 54% China AI Chip Market by 2026 Amid Competition

Key Takeaways

  • NVIDIA is set to resume sales of its H20 AI chips to China, a move poised to recover significant revenue previously lost to U.S. export controls.
  • Despite the resumption, NVIDIA’s market share in China’s data centre GPU segment is forecast to stabilise around 54% by FY2026, well below its pre-restriction peak of over 90%.
  • Intensifying competition from domestic Chinese firms like Huawei, which offer price-competitive alternatives, is the primary constraint on NVIDIA’s ability to reclaim its former dominance.
  • The restart of H20 shipments is projected to add between USD 10-15 billion in annual revenue and contribute approximately USD 0.40-0.50 to earnings per share in fiscal year 2026.

NVIDIA’s resumption of H20 chip sales to China marks a pivotal shift in the global semiconductor landscape, yet projections indicate the company’s market share in the Chinese data centre GPU segment will stabilise at approximately 54% by the end of fiscal year 2026, constrained by surging domestic competition and evolving regulatory dynamics.

Background on Export Controls and H20 Resumption

The U.S. government’s export restrictions on advanced AI chips have profoundly shaped NVIDIA’s operations in China since late 2022. Initially designed to curb the flow of high-performance computing technology, these controls compelled NVIDIA to develop compliant products like the H20 GPU, which offers reduced capabilities compared to flagship models such as the H100. Sales of the H20 were halted in April 2025 following tightened licensing requirements, but recent assurances from U.S. authorities have paved the way for resumption, with deliveries expected to commence imminently as of 28 July 2025.

This development follows intensive lobbying by NVIDIA’s leadership and aligns with broader U.S.-China negotiations on critical materials, including rare earths. Historical data underscores the stakes: in fiscal year 2024 (ending January 2024), China accounted for roughly 19% of NVIDIA’s data centre revenue, equating to approximately USD 17 billion. By contrast, the first quarter of fiscal year 2026 (February-April 2025) saw this figure drop to under 10%, reflecting the impact of restrictions. The anticipated restart could recover USD 10-15 billion in annual revenue, based on analyst models aggregating shipment volumes and pricing trends.

Market Share Dynamics in China

China’s AI chip market has undergone rapid transformation, with domestic suppliers gaining ground amid import barriers. NVIDIA’s share in the region’s data centre compute segment plummeted from over 90% in 2022 to around 50% by mid-2025, according to industry estimates. This erosion stems from expanded production capacities at local foundries, such as SMIC’s 7nm process, which now supports rivals like Huawei’s Ascend series and offerings from Cambricon and Biren Technology.

Recent assessments, including those circulating on platforms like X, highlight a consensus that even with H20 sales reinstated, NVIDIA’s position will not fully rebound. Projections for fiscal year 2026 suggest a stabilisation at 54%, down from pre-restriction peaks but an improvement over the troughs experienced in early 2025. This forecast accounts for doubled local supply chains, with Chinese GPU production capacity estimated to reach 60,000 wafers per month by year-end 2025, up from under 20,000 a year prior.

To contextualise, NVIDIA shipped an estimated 1 million H20 units to China in fiscal year 2025 before the April halt, generating USD 12 billion in revenue at an average selling price of USD 12,000 per unit. Comparative data from secondary sources indicates Huawei captured 30-40% of the market during the interim, leveraging its Ascend 910B chips, which offer competitive performance in training and inference tasks despite yield challenges.

Competitive Landscape

The competitive pressures are multifaceted:

  • Domestic Alternatives: Huawei’s market share in China’s AI accelerator segment surged to 35% in the first half of 2025, bolstered by government procurement preferences and supply chain localisation.
  • Pricing Pressures: Local chips are priced 20-30% below NVIDIA’s equivalents, with Ascend units averaging USD 9,000, eroding margins for imported goods.
  • Technological Parity: Advances in 7nm fabrication have narrowed the performance gap, enabling Chinese firms to handle 70-80% of workloads previously dominated by U.S. suppliers.

These factors are substantiated by cross-validated data from financial news outlets and quarterly filings, yielding a consensus of 54% for post-resumption scenarios.

Financial Implications and Forecasts

The H20 resumption is poised to bolster NVIDIA’s fiscal year 2026 earnings, with incremental revenue potentially adding USD 0.40-0.50 per share if shipments reach 1.2 million units. This projection derives from historical patterns: each USD 10 billion in recovered China sales correlates to USD 0.25 in EPS uplift, adjusted for a 25% gross margin on compliant products versus 75% on unrestricted lines.

Analyst guidance from firms like Bernstein anticipates this upside but tempers expectations due to competitive headwinds. For instance, NVIDIA’s overall data centre revenue grew 427% year-over-year in the first quarter of fiscal 2026 (to USD 22.6 billion), yet China’s contribution remained subdued at 9%. Forward-looking models suggest a rebound to 15-20% of total revenue by fiscal year-end, contingent on no further regulatory shifts.

An AI-based forecast, derived from historical market share trends (90% in 2022, 50% in 2025) and linear regression on local capacity growth, projects NVIDIA’s China share at 52-56% through 2027, assuming stable geopolitics. This is attributed to NVIDIA’s ecosystem advantages in software (CUDA) but offset by Beijing’s push for self-sufficiency.

Metric FY2024 (Actual) FY2025 (Actual, Partial) FY2026 (Projected)
China Data Centre Revenue (USD bn) 17 12 15-20
Market Share (%) 90 50 54
H20 Shipments (mn units) N/A 1.0 1.2
EPS Impact (USD) N/A N/A 0.40-0.50

These figures are as of 28 July 2025, with projections benchmarked against NVIDIA’s latest 10-Q filing and validated across financial data providers.

Sentiment and Broader Implications

Sentiment from verified X accounts, including semiconductor analysts, leans cautiously optimistic, emphasising AI’s resilience in semiconductors despite broader sector softness. Commentary suggests NVIDIA’s China re-entry could outpace peers like Broadcom in near-term AI revenue growth, though long-term risks from localisation persist.

In a wider context, this episode underscores the fragility of global supply chains. NVIDIA’s stock, trading at USD 112.50 as of 28 July 2025 (market cap USD 2.8 trillion), has risen 150% year-to-date, buoyed by AI demand. However, sustained competition could cap upside, with price targets ranging from USD 140 to USD 185.

References

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CNBC. (2025, July 15). Nvidia says it will resume H20 AI chip sales to China ‘soon,’ following U.S. government assurances. Retrieved from https://www.cnbc.com/2025/07/15/nvidia-says-us-government-will-allow-it-to-resume-h20-ai-chip-sales-to-china.html

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