The U.S. has given the green light for Nvidia to reenter the China AI chip market, but the Chinese government is flashing a red light. And Nvidia stock is riding the brakes.
On Monday, President Donald Trump cleared the way Nvidia and rival AMD to again sell modified versions of their artificial intelligence processors in China. In a controversial move, the U.S. will take a 15% cut of those sales.
However, Chinese authorities have sent notices to a range of firms discouraging the use of Nvidia H20 processors, Bloomberg reported. It took a particularly strong stance against the use of Nvidia chips for any government or national security-related work by state enterprises or private companies.
Chinese state media has alleged that Nvidia's H20 chips might contain "backdoors" that would allow remote access and control and potentially contain a "kill switch." Nvidia has vehemently denied those claims.
Meanwhile, the Information reported Tuesday that Chinese regulators have ordered large tech companies to suspend purchases of Nvidia's H20 processors.
The Cyberspace Administration of China ordered TikTok owner ByteDance, Alibaba and Tencent to suspend orders of H20 chips, the report said. The Chinese government wants to investigate the security of the chips, it said. The move is also meant to persuade local companies to use chips from Huawei and other domestic vendors.
Nvidia Stock Is On Five IBD Lists
Nvidia developed the H20 to comply with U.S. export restrictions during the Biden administration. It is less capable than the company's prior-generation Hopper series processors.
The Trump administration initially banned the sale of those throttled processors to China in April amid rising trade tensions. But it lifted the ban in July.
On Monday, Trump said he might allow Nvidia to sell of a downgraded version of its current-generation Blackwell processor in China.
On the stock market today, Nvidia stock wavered, but ended the session up 0.5% to 183.10.
BofA Securities analyst Vivek Arya on Tuesday reiterated his buy ratings on Nvidia and AMD. In a client note, he said the resumption of China AI chip sales is "an incremental positive" for both stocks.
Nvidia stock is on five IBD lists: IBD 50, Big Cap 20, Sector Leaders, Leaderboard and Tech Leaders.
AMD stock is on the IBD Tech Leaders list.
Follow Patrick Seitz on X at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
