Semiconductor giant Nvidia’s (NVDA) H20 artificial intelligence (AI) chips are facing a shortage in China amid increasing demand, according to Chinese partner H3C. The news was first reported by Reuters, citing reference to a client notice. Nvidia’s H20 AI chips are among the few advanced AI processors legally permitted for sale in China. H3C warned that their shortage could pose a serious threat to China’s AI ambitions.
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H3C manufactures data center servers and is one of the OEM (Original Equipment Manufacturer) partners for the sale of Nvidia’s chips in the mainland. Notably, H3C’s H20 inventory is rapidly depleting, with new shipments expected only by mid-April. Owing to the limited supply, H3C has decided to distribute the chips on the basis of a profit-first approach, by prioritizing long-term customers who offer higher profit margins.
Nvidia’s H20 AI Chips Grab Headlines
The H20 was launched in 2023, after the U.S. administration tightened the restrictions on chip exports in October 2023, fearing their misuse in China’s military warfare. Nvidia’s H20 chips are designed specifically for export to China and are compliant with the U.S. export control requirements.
Following the launch of DeepSeek AI’s low-cost R1 model in January, several Chinese companies are vying to adopt its technology, leading to a massive demand for the H20 chips. However, ongoing trade tensions and the related supply chain challenges are affecting their import into China. Large Chinese tech companies, including Alibaba (BABA), Tencent Holdings (TCEHY), and TikTok owner ByteDance have also ramped up orders of the H20 chips.
Meanwhile, recent reports suggest that Nvidia’s H20 chip exports could be hurt by China’s new energy standards. The National Development and Reform Commission (NDRC) is pushing Chinese firms to use chips that comply with its new environmental rules, which the H20 chip currently does not meet, posing a potential threat to its exports.
Is NVDA Stock a Buy, Hold, or Sell?
On TipRanks, NVDA stock commands a Strong Buy consensus rating based on 39 Buys and three Hold ratings. Also, the average Nvidia price target of $176.54 implies 55.2% upside potential from current levels. In the past year, NVDA stock has gained 26.1%.
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