Nvidia Faces Growing Threat As China Accelerates Chipmaking Push
Nvidia faces increasing competition in China as the country boosts domestic chip production, threatening its market share. Companies like Huawei and SMIC are ramping up advanced chipmaking, while AI startups optimize for local hardware. This shift follows U.S. export restrictions on Nvidia, which could cost the company $2-3 billion in quarterly revenue. Despite this, strong global demand and new product rollouts may mitigate losses. Nvidia's stock is currently down 0.03% to $181.75.
Nvidia NVDA faces mounting pressure in China as Beijing accelerates domestic chip production, with Huawei, SMIC, and AI startups ramping capacity and optimizing systems around local hardware, threatening a market that once accounted for more than 13% of the U.S. chipmaker's revenue.
Huawei and Semiconductor Manufacturing International Corp. (SMIC) are ramping up advanced chipmaking, while AI players such as DeepSeek are optimizing models for Chinese processors to reduce dependence on Nvidia, the Financial Times reported Wednesday.
China's strategy is underscored by three new fabrication plants dedicated to Huawei chips, SMIC's plan to double 7nm production, and a wave of state-backed funding for firms like Cambricon, Biren, and MetaX, all aimed at closing the technology gap with the West.
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DeepSeek, which currently trains models on Nvidia clusters, is preparing to shift to domestic chips built around its FP8 data format, prioritizing efficiency over precision to compete globally. The company's new V3.1 model, optimized for Chinese hardware, highlights how quickly local alternatives are advancing.
The push comes after Washington restricted Nvidia's access to Chinese customers over national security concerns, prompting Beijing to consolidate its AI chipmaking base. The U.S. pandemic-era policy of expanding domestic semiconductor capacity further sharpened the race to reduce cross-border reliance.
Last week, Nvidia halted development of its China-focused H20 AI chip, signaling the deepening impact of Beijing's campaign to steer tech giants toward homegrown hardware.
KeyBanc analysts estimate that excluding China sales could shave $2 billion to $3 billion off Nvidia's quarterly revenue. Still, robust global demand and the upcoming rollout of Blackwell B200 chips may offset some of the losses.
Price Action: NVDA stock is trading lower by 0.03% to $181.75 at last check Wednesday.
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