China Rejects Nvidia’s H20 Chip Despite U.S. Lifting Export Ban

In a surprising twist to the ongoing U.S.–China technology rivalry, Beijing has reportedly refused to purchase Nvidia’s H20 chip, even after Washington lifted its export ban in May. The move signals China’s determination to reduce reliance on American semiconductors while strengthening its domestic chipmaking capabilities.

The H20 chip — designed specifically for the Chinese market as a downgraded alternative to Nvidia’s more advanced products — was originally created to comply with restrictions imposed by the Biden administration over national security concerns. These limits prevented U.S. companies from selling high-performance AI chips to China.

However, the détente reached earlier this year appears to have stalled, as Chinese authorities have instructed local firms to avoid chips from U.S. giants Nvidia and AMD.

Why China Is Saying “No” to the H20

Industry insiders point to two key reasons behind Beijing’s stance:

Security Concerns – Chinese officials fear that American-made chips could be vulnerable to hacking, tracking, or the inclusion of a “kill switch,” which could disable the technology remotely. Such risks are viewed as unacceptable for use in government-related infrastructure or sensitive projects.
Boosting Domestic Chipmakers – China is pushing aggressively to strengthen its own semiconductor industry. Huawei, among other local firms, has reportedly developed chips that can compete with the H20, making imports less attractive.

Former U.S. President Donald Trump weighed in earlier this week, calling the H20 “obsolete” and claiming that China already has an equivalent product.

The Rare-Earth Minerals and Revenue-Sharing Deal

The temporary truce in May was part of a broader understanding between the two nations. In exchange for lifting the ban on the H20 chip, China agreed to resume the export of rare-earth minerals to the U.S. — resources critical for a wide range of technologies, from electric vehicles to military equipment.

Another unusual element of the arrangement was an unprecedented revenue-sharing deal. According to reports, Nvidia and AMD consented to give the U.S. government a 15% share of revenue from sales of the H20 and certain other chips to Chinese customers.

The legality of this revenue-sharing clause remains uncertain. Officials are still working with the U.S. Department of Commerce to define how such payments would be collected and enforced.

A Handshake Agreement with No Paper Trail?

Sources familiar with the negotiations suggest the deal may have been more symbolic than binding. Without an official written agreement, the terms were reportedly based on verbal commitments — a “handshake agreement” that is now facing practical and legal hurdles.

Analysts note that such informal arrangements are a recurring theme in what they describe as “Trump-era deals,” which often lacked the detailed documentation needed for smooth execution.

The Market Impact on U.S. Chipmakers

China’s refusal to purchase the H20 chip is a major setback for American semiconductor firms. The Chinese market accounts for approximately 13% of Nvidia’s total revenue and 24% of AMD’s, making it one of their largest sources of demand.

While Nvidia has maintained that the H20 is not intended for military applications and is unsuitable for government infrastructure, the company faces a real challenge in offsetting lost Chinese sales.

Financial experts warn that the prolonged standoff could impact quarterly earnings, weaken market confidence, and accelerate China’s technological self-sufficiency efforts.

Looking Ahead

With no formal agreement and a widening trust gap between the two economic superpowers, the future of U.S.–China tech cooperation remains uncertain. The chip industry — already grappling with global supply chain disruptions — may see further market volatility as both nations double down on semiconductor independence.

If the stalemate continues, American companies could lose a critical foothold in one of the world’s largest technology markets, while Chinese firms like Huawei stand to gain. For now, the so-called “truce” looks increasingly fragile.

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