The race between the United States and China to dominate artificial intelligence has reached a critical inflection point in the hardware arena. Nvidia, once the undisputed leader in China's AI chip market with a 95% share, now faces an unprecedented decline as domestic champion Huawei takes the lead. The shift, driven by US export controls and Beijing's strategic push for semiconductor self-sufficiency, marks a dramatic reversal in the global tech landscape.
Nvidia CEO Jensen Huang recently acknowledged the change during a visit to Beijing, where he was mobbed by fans seeking selfies. Yet his celebrity status has not translated into sales. Washington's restrictions on advanced chip exports, initially imposed under President Biden and maintained under President Trump, barred Nvidia from selling its top-tier H200 AI chips to China. By the time Trump agreed to a reprieve during his May 2026 summit with Xi Jinping, Beijing had already pivoted to encourage the use of domestically designed alternatives.
Huawei's Rise in AI Chips
Huawei, once known primarily for telecom equipment and smartphones, has emerged as the dominant force in China's AI chip market. Its Ascend 950 series is now considered roughly comparable to Nvidia's H200 in performance, according to industry analysts. The shift was accelerated by the US blacklisting of Huawei in 2019, which barred the company from buying the most advanced chips from American firms. In response, Huawei invested heavily in developing its own chips and chipmaking capabilities.
“China now believes in its own self-sufficiency and supply capabilities,” said He Hui, director of semiconductor research at Omdia. A Bernstein report estimates that Nvidia's market share in China will shrink from about 40% in 2025 to just 8% in 2026, while Huawei's will grow to roughly 50%. The speed of this transition has surprised many observers.
Huawei's progress is not just in chips but in entire computing systems. In September 2025, the company announced it was rolling out some of the world's most powerful AI computing clusters, combining thousands of its own chips. He Tingbo, head of Huawei's semiconductor business, told a recent event: “We have found pretty good solutions.” When asked how Huawei compares to US rivals, she added, “I think only time will tell.”
The Impact of Export Controls
The US export control regime, designed to slow China's technological advances, has instead accelerated domestic innovation. Nvidia engineered a stripped-down version of its chip, the H20, to comply with restrictions, but shipments gradually declined. The H200, which is among Nvidia's most powerful products, has not been sold in China at all. Huang stated at Nvidia's shareholders meeting that the company has “yet to generate any revenue” from the H200 in China and is uncertain whether imports will ever be allowed.
Despite the controls, demand for advanced AI chips in China remains high. Several smuggling cases have demonstrated the continued appetite for Nvidia's technology. Chinese universities and major tech companies still seek chips like the H200 for research and development. However, the government's explicit support for domestic alternatives has shifted procurement patterns.
DeepSeek, the fast-growing Chinese AI company often compared to OpenAI, recently adapted its latest V4 model for Huawei's Ascend chips. Paul Triolo of DGA-Albright Stonebridge Group noted that there is likely “significant effort going into collaboration between DeepSeek and Huawei” to train future models on domestic hardware. This shows that Chinese-made chips can potentially replace Nvidia ones, though analysts like Phelix Lee of Morningstar caution against expecting an abrupt switch.
Global Implications and Future Outlook
Nvidia's global sales remain strong, with expected revenue of $91 billion in the May-July quarter, excluding any data center compute revenue from China. The company's annual revenue of nearly $216 billion dwarfs Huawei's $126 billion. But the loss of the Chinese market is a strategic blow. Huang has argued that the US must balance national security with competitiveness, saying, “We have to make sure that we have national security and that we protect our nation, but we also simultaneously should go and compete and grow our technology industry and maximize our exports.”
Huawei's ambitions extend beyond China. The company already operates in 170 countries and regions, and its chips could eventually find export markets. As China's advanced chip manufacturing capacity increases and prices become more competitive, firms like Huawei could gain market share in Southeast Asia and beyond. “China's strategy of pursuing technological self-sufficiency — and eventually exporting its technologies — is unlikely to change regardless of whether Nvidia can sell its chips in China,” said Brady Wang of Counterpoint Research.
The semiconductor supply chain remains deeply global. No single country can build an advanced AI chip entirely on its own. Nvidia relies on Dutch firm ASML's extreme ultraviolet lithography machines and Taiwan's TSMC for fabrication. China is still barred from buying ASML's EUV machines, which limits its ability to produce the most cutting-edge chips. However, Chinese companies are making strides in older technologies and in specialized AI accelerators.
The battle for AI supremacy is now playing out in hardware as much as in software. While Nvidia's H200 and future Blackwell chips lead the world in raw performance, Huawei's Ascend series is closing the gap. The US-China technology war has created a bifurcated market where each side is developing an independent supply chain. For now, Nvidia's loss in China is Huawei's gain, but the long-term consequences for global AI innovation remain uncertain.
Source:BusinessLine News