Shares of Chinese semiconductor majors had a volatile day of trade on Monday following reports that the Trump administration is considering allowing US chipmaker Nvidia to sell its AI chip H200 in China.
Shanghai-listed shares of one of the country’s leading AI chipmakers, Cambricon, slipped as much as 2.5% in early trading.
Meanwhile, Hong Kong-listed shares of its competitor Hua Hong Semi and state-backed Semiconductor Manufacturing International Corporation (SMIC) fell more than 9% and 6% respectively in early trade.
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All three recovered much of their losses by the close of trading, while Cambricon closed with a gain of more than 1%. Hua Hong and SMIC ended the day with lower losses of about 5% and 1%, respectively.
The choppy trade on Monday points to uncertainty ahead for local chipmakers racing to catch up with Nvidia, the world’s most valuable company.
Beijing has thrown its weight, and billions of dollars, behind its chip industry. But strict US export controls mean China’s firms remain cut off from most cutting-edge technology required to manufacture chips that power complex AI tasks like inference.
Still China’s chipmakers have, so far, managed to deal with the fallout of those restrictions, partly due to strong state support driven by Beijing’s push for self-sufficiency. And they have also benefitted from US curbs blocking flows of Nvidia’s chips, which have forced major Chinese tech firms to turn to domestic chip suppliers.
Before those restrictions, which intensified in April this year, Nvidia dominated China’s AI market with a share of more than 95%.
Last month, Nvidia chief Jensen Huang said that market share was now down to zero. And last week, Huang, speaking to America’s Fox News, reiterated those concerns.
“I’m forecasting China’s sales to be zero. It’s zero for the next quarter, zero for the quarter after that… We’re assuming it’s going to be zero,” he said.
A powerful chip looms
That dynamic may soon change, however.
On Friday, Reuters reported the Trump administration was considering giving a green light to sales of Nvidia’s H200 artificial intelligence chips to China, citing people familiar with the matter.
The Commerce Department, which oversees US export controls, is reviewing a change to its policy of barring sales of such chips to China, the sources told Reuters, stressing that plans could change.
A White House official declined to comment but said: “The administration is committed to securing America’s global technology leadership and safeguarding our national security.”
Nvidia did not comment directly on the review but told Reuters that current regulations do not allow the company to offer a competitive AI data centre chip in China, leaving that massive market to its the group’s fast-growing foreign competitors.
The H200 chip, unveiled two years ago, has more high-bandwidth memory than its predecessor the H100, which allows it to process data more quickly.
It is also estimated to be twice as powerful as Nvidia’s H20 chip, the most advanced AI semiconductor that can legally be exported to China.
The Trump administration banned sales of the H20 chip to China but quickly reversed that decision. The turnaround gave little boost to Nvidia, though, as Chinese policymakers enforced restrictions on its tech firms against buying the H20.
Beijing cited security concerns behind those restrictions, but its policy was also in line with its larger push to cut reliance on foreign technology.
Enforcing such a ban on H200 sales, if it gets a green light, might be harder for Beijing, however, considering its chipmakers are yet to produce chips that can match even the H20’s performance.
$200 billion potential
Beijing may also be more open to the H200, as it walks a delicate line in its ties with the US. The world’s two biggest economies have struggled to maintain cordial ties all year, but tensions have eased after Trump and Chinese leader Xi Jinping brokered a trade and tech truce in Busan last month.
The possibility of Washington allowing Nvidia to sell the H200 also signals a friendlier approach to China. Discussions on Nvidia’s chip were on the agenda when Trump met Xi.
Faced with Beijing’s muscular use of export controls on rare earth minerals, critical for producing a raft of tech goods, Trump this year has threatened new restrictions on tech exports to China, but ultimately rolled them back in most cases.
Meanwhile, China hawks in Washington remain concerned that shipments of more advanced AI chips to China could help Beijing supercharge its military, fears that prompted the Biden administration to set limits on such exports.
Amid those concerns, though, China’s AI market potential could become key to Trump’s final decision on the matter. Huang said last week that China represents a AI chip market worth nearly $50 billion. And its value could grow to as much as $200 billion by the end of the decade, he said.
- Vishakha Saxena, with Reuters
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