China has reportedly raised security concerns about Nvidia Corp.’s (NASDAQ:NVDA) H20 chips, especially regarding potential backdoor risks, while the U.S. government, spearheaded by Donald Trump, pushes for a 15% revenue share from sales to China as part of its deal with the chipmaker.
China Warns Firms Off Nvidia H20 Chips, Threatening US Sales Push
In the past few weeks, China has told domestic companies to avoid Nvidia's H20 processors, especially for government projects, reported Bloomberg, citing people familiar with the matter.
The authorities have sent notices to companies discouraging the use of H20 chips in state enterprises or sensitive projects.
As per the report, Advanced Micro Devices, Inc. (NASDAQ:AMD) is also impacted by this development, although it's unclear if its MI308 chip was named.
Earlier on Sunday, it was reported that the state-run media outlet Yuyuan Tantian, linked to China's CCTV, criticized the H20 chips, saying they are environmentally unfriendly and possibly unsafe for use in critical sectors.
Security Concerns Over Nvidia Chips
Some notices questioned why firms buy Nvidia chips over domestic alternatives and whether they found security flaws, the report added, citing one of the sources.
State media has also cast doubt on the H20's reliability. Regulators raised similar issues with Nvidia, which insists the chips are secure and not for military or government infrastructure.
In a statement to the publication, Nvidia stated that the "H20 is not a military product or for government infrastructure." The company spokesperson added that China has plenty of domestic chips and has never depended on American processors for government operations.
Trump Administration to Get 15% Of Sales Revenue From China
Both Nvidia and AMD have reportedly gotten U.S. approval to sell lower-end AI chips to China, on the condition that they give Washington 15% of sales.
Earlier, analysts expected Nvidia's share of China's AI chip market to drop in 2025, driven by the rapid expansion of domestic rivals like Huawei Technologies and Cambricon and the effects of U.S. sanctions.
Meanwhile, Trump has signaled he is open to Nvidia's plan to offer China a scaled-down version of its upcoming Blackwell AI chip, albeit with performance cut by as much as 50%.
Price Action: On Monday, Nvidia shares fell 0.32%, followed by a 0.27% drop in pre-market trading on Tuesday, according to Benzinga Pro.
Benzinga's Edge Stock Rankings show that NVDA has maintained an upward trend over the short, medium and long term. Additional performance insights are available here.
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