Nvidia Faces Hurdles in Resuming H20 AI Chip Sales to China Despite Export Ban Lift

Nvidia's Challenges in Resuming H20 AI Chip Sales to China

Nvidia, the AI chip giant, is encountering significant obstacles in its efforts to resume sales of H20 AI chips to China following the relaxation of U.S. export restrictions. Despite the company's recent announcement of plans to restart sales, various factors are complicating the process and potentially delaying substantial revenue impact until 2026 1

1

2

2

.

Production and Supply Constraints

According to reports from The Information, Nvidia has informed its Chinese customers that it has limited supplies of H20 chips and does not plan to restart production 1

1

5

5

. The company's supply chain was disrupted when the U.S. government imposed a ban on H20 chip sales to China in April, forcing Nvidia to void customer orders and cancel manufacturing capacity it had booked with Taiwan Semiconductor Manufacturing (TSMC) 1

1

5

5

.

Logistical Setbacks and Timeline

While Nvidia CEO Jensen Huang announced the expected granting of export control licenses for H20 chips, the company faces several hurdles in meeting Chinese demand 2

2

3

3

:

1. Export licenses are still pending approval
2. Previous orders were canceled, requiring renegotiation
3. Nvidia has limited finished inventory
4. The company's supply chain typically takes nine months to ramp up production

These factors suggest that revenue from H20 chip sales to China will likely be negligible until at least the fourth quarter of 2025 2

2

.

Production Line Repurposing and Memory Constraints

Reports indicate that TSMC, Nvidia's contract chip manufacturer, has repurposed production lines previously dedicated to H20 chips for other products 3

3

. This shift in manufacturing priorities creates additional challenges for Nvidia in restarting H20 production.

Furthermore, Nvidia may face memory chip constraints from SK hynix, as the Korean memory company has reportedly informed Nvidia of potential difficulties in supplying higher-end memory chips for newer H20 GPUs destined for China 3

3

.

Market Expectations and Future Outlook

Analysts from Morgan Stanley, Piper Sandler, and Rosenblatt suggest keeping near-term expectations in check due to the various challenges Nvidia faces 2

2

. While the resumption of H20 sales to China is seen as a positive development for AI stocks, including Nvidia, the impact is more likely to be significant in 2026 rather than the immediate future 2

2

.

Investor attention may shift towards Nvidia's next-generation Blackwell-based RTX chips, potentially accelerating a move away from the older Hopper line, which includes the H20 2

2

3

3

. Reports also suggest that Nvidia is developing a Blackwell-specific chip for its Chinese customers, subject to U.S. approval 3

3

.

As Nvidia enters its quiet period ahead of earnings announcements, investors will be closely watching the numbers to gauge the potential tailwinds from resumed sales to China, among other variables 3

3

4

4

. The path to recovery in the Chinese market appears to be more about rebuilding momentum than generating immediate upside, with the potential for a more substantial revenue impact starting next year 2

2

.