Nvidia’s (NVDA) business is booming, but one sector of the market remains a seemingly impenetrable morass for the world’s leading chip designer: China.
For years, Nvidia chief executive Jensen Huang has struggled to gain a foothold in the world’s second-largest economy, due in large part to restrictions imposed by the Department of Commerce, which regulates international chip sales. Seeking inroads, Huang has repeatedly urged the White House to loosen those restrictions, which the administration says are necessary for national security and for the US to remain ahead in the AI race.
When Nvidia last reported earnings, forward guidance once again omitted sales projections for China, continually snarled by state politics.
Nvidia stock fell 3% before the bell on Friday.
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The complicated relationship between Nvidia and China was thrust back into public light on Thursday after the New York Times reported new US intelligence efforts. The US intelligence service, the report says, believes a Chinese national named Alice Huang — who has served as a leader of Nvidia chip customer Megaspeed and who maintains a well-documented relationship with Huang himself — has acted as an intelligence asset and passed information to the governing party in Beijing.
The reporting raises major questions about potential information leakage from Nvidia to China, not only regarding trade secrets but also about Jensen Huang’s increasingly deep ties to the White House as he has lobbied for eased restrictions. At the All-In summit in September, Huang took a call from Trump on stage, putting the US leader on speakerphone as Trump dismissed fears around AI’s security implications as a “scam.”
The race between the US and China to develop and disseminate their own AI technology has, over the past several years, become a paramount concern for the leadership of both governments.
While China has matched or even surpassed the US on the development and distribution of “open weight” AI models, which often come at far cheaper costs than “closed weight” alternatives, the US frontier labs such as Anthropic (ANTH.PVT) and OpenAI (OPAI.PVT) have retained the lead in developing the most advanced models.
Powering those advanced models are chips designed by Nvidia, whose leading semiconductors are often regarded as the gold standard for computing performance. While the chips are hugely popular in the US and other global markets, the Commerce Department has, since 2022, blocked Nvidia from selling successive generations of its chips to Chinese buyers as Washington seeks to maintain its edge over Beijing.
President Trump greets Nvidia CEO Jensen Huang at a media briefing following a meeting on artificial intelligence outside the West Wing of the White House on Sept. 29, 2026. (Kevin Dietsch/Getty Images) ·Kevin Dietsch via Getty Images
Huang won a victory for his company in December 2025 when he secured permission from the Trump administration for Nvidia to export some H200 chips to Chinese buyers, a policy change that came amid a $5 million lobbying push by Nvidia throughout the year. Even chip models such as the H200, which are now several generations behind Nvidia’s flagship products, remain competitive for Chinese buyers with options available from companies like Huawei Technologies.
Yet H200 sales accounted for less than 1% of Nvidia’s $89 billion in data center revenue for the second quarter, Nvidia said. Part of that dearth in sales has also come from Beijing, which recently moved to block Chinese buyers from purchasing Nvidia chips as Xi Jinping’s government looks to reduce dependence on US technology, instead turning to homegrown alternatives from the likes of Huawei.
Given the “ongoing geopolitical uncertainty,” Nvidia CFO Colette Kress told analysts, “there is no China data center compute revenue in our forward outlook.”
While it’s not clear how many H200 chips Nvidia sold to Chinese buyers in the second quarter, those sales fell below the US-approved maximum due to blocks imposed by the Chinese government, the company said.
“Under the current rules and geopolitical landscape, we are unable to create and deliver a competitive product for wide distribution in China’s data center market with the approval from both the USG and the Chinese government,” Nvidia said in its second quarter earnings report.
Smuggling concerns
The restrictions haven’t stopped Chinese buyers from pursuing workarounds to obtain some of the world’s leading chips.
Since the US government imposed its sales restrictions on Nvidia, a black-market shadow trade has sprung up in response, according to public reporting and investigations by the Department of Justice. Buyers and sellers throughout Southeast Asian nations not under restrictions import chips under legitimate guises, then switch labels, change packaging, or use other methods to disguise the package’s true contents before sending the chips onward into China, reporting and the US government have alleged.
Inside China, users on Douyin, the nation’s version of TikTok, openly hawk sanctioned chips such as Nvidia’s Blackwell B300, priced at millions of US dollars per server, in videos reviewed by Yahoo Finance. Such sales would likely contravene the Commerce Department’s restrictions.
Megaspeed, the Singapore-based company that employed Alice Huang, has been investigated by US authorities for more than a year due to concerns that the company may be sending Nvidia’s most advanced chips to data centers throughout Southeast Asia that serve Chinese companies or directly funneling the physical chips into China through intermediaries, per the New York Times.
President Trump and China’s President Xi Jinping visit the Temple of Heaven in Beijing, on May 14, 2026. (Brendan Smialowski/Pool Photo via AP, File) ·Brendan Smialowski/Pool AFP via AP
Nvidia has repeatedly stated that there’s no evidence its chips are being smuggled into China, and the company said to the New York Times that if someone close to the company were a “threat to American industry,” Nvidia is confident the US government would make the company aware. The company added that while Huang often talks with customers, those conversations never include “information relevant to national security.”
Even so, for Huang and Nvidia, the headlines come as a reminder of the geopolitical tensions inherent to the AI trade.
While it’s in Nvidia’s interest to serve as wide a customer base as possible, national security concerns in Washington continue to interfere with the company’s ability to sell into the world’s second-largest economy, where buyers have shown willingness to pay top dollar for its products.
Correction: A previous version of this story misstated where Huang took a call from Trump on stage. It was at the All-In Summit.
Follow Jake Conley on X @byjakeconley or email him at jake.conley@yahooinc.com.
