Nvidia (NASDAQ: NVDA) plans to release a reduced-performance version of its H20 AI chip in China within the next two months, Reuters reported on Friday. The move is intended to comply with tighter U.S. export restrictions on advanced semiconductor technologies.
Under current U.S. rules, the original H20 chip falls into a category that requires a special export license. To sidestep this constraint, Nvidia will lower the chip’s computing capabilities and memory capacity, enabling legal distribution within China.
While this approach ensures regulatory compliance, it may also make the product less competitive—especially as Chinese rivals like Huawei continue to roll out increasingly capable AI chips. Companies such as DeepSeek, Baidu, and Alibaba are already integrating domestic alternatives into their AI infrastructures.
Despite the limitations, China remains a vital market for Nvidia, contributing $17 billion in revenue—around 13% of its total—in the fiscal year ending January 2025. CEO Jensen Huang’s visit to Beijing in April further underscored the strategic importance of the region to the company.
As the downgraded H20 enters the market, the shift could accelerate AI chip localization in China and trigger a broader reshuffling of the global AI supply chain.