Nvidia has paused production of its H20 AI chip after Beijing urged Chinese companies to abandon American hardware over alleged security risks, prompting a swift shake-up across the chip sector and investor jitters.
Suppliers told to stop, inventory builds up
The chipmaker instructed suppliers Samsung Electronics and Amkor Technology to halt manufacturing this week as orders dwindled in China, according to The Information, a move that adds uncertainty to the H20’s outlook in the market it was designed to serve. According to the New York Post, Nvidia shares slipped 1.1% in early trading Friday as Wall Street assessed the impact on a business that generated $17 billion in China last year.
The H20 was engineered as a scaled-down accelerator to comply with US export restrictions while still addressing Chinese demand. The halt follows recent messaging from Chinese regulators warning firms about using American chips on alleged security grounds. Nvidia CEO Jensen Huang said the H20 contains no backdoors and noted the company is in dialogue with authorities, telling reporters in Taiwan it was too early to know what comes next.
Nvidia has already written off $5.5 billion in H20 inventory after the initial ban under the Trump administration. Semi-finished Nvidia chips are now “piling up” at Amkor, The Information reported. The company acknowledged it holds substantial H20 stock and called market conditions “highly uncertain.”
Domestic rivals gain as China pushes self-reliance
Chinese chipmakers rallied on the news. Cambricon Technologies’ shares jumped 20% Friday, while Huawei Technologies and other domestic players stand to benefit as Beijing accelerates efforts to reduce reliance on US technology. Momentum also built after Chinese AI startup DeepSeek said its latest model was built to run on next-generation homegrown chips, though it did not provide details.
Nvidia’s stance and next steps
Both Nvidia and AMD recently received approval from Washington to resume limited AI chip sales to China under terms that require handing over 15% of related revenue to the US government. Nvidia emphasized that the H20 is intended for commercial use and “is not a military product or for government infrastructure,” adding that it constantly manages its supply chain to address market conditions. The company hopes to offer a successor to the H20, though Huang said any launch depends on decisions by the incoming Trump administration.
Bloomberg Intelligence analysts said the halt creates “fresh uncertainty” over when Nvidia’s China business can recover, while strong US demand could mitigate the impact. Nvidia reports earnings next week, offering a closer look at the fallout from escalating trade tensions.
