Dropping from 95% to Zero Market Share

Nvidia CEO Jensen Huang’s initial assertion to the Financial Times that China would “win the AI race,” followed by a subsequent recalibration, underscores a complex predicament years in the making. The world’s most valuable chipmaker now finds itself squeezed between Washington and Beijing, with both leveraging AI chip restrictions as a weapon in a broader technological standoff. Nvidia’s attempts to appease both sides may ultimately leave it satisfying neither.

From Dominance to Zero: A Market Collapse

The data paints a stark picture. Speaking at a Citadel Securities event, Huang disclosed that Nvidia’s share of China’s AI accelerator market has plummeted from a commanding 95% to essentially zero. Critically, the company is now projecting no revenue stemming from China. This represents far more than a temporary revenue dip. China previously accounted for 20% to 25% of Nvidia’s data center revenue, a segment that generated upwards of $41 billion in its most recent fiscal performance.

Adding to the pressure is recent information suggesting that the White House has informed federal agencies it will block Nvidia from selling its latest scaled-down AI chips, specifically the B30A, designed to train large language models, to China. Despite Nvidia reportedly providing samples to Chinese customers and working to modify the design to comply with U.S. regulations, a firm line has been drawn.

However, U.S. restrictions only tell the half of the story. Beijing has issued directives mandating that new data center projects receiving state funding must exclusively use domestically-produced AI chips. Projects that are less than 30% complete are being ordered to remove installed foreign chips or cancel purchase orders.

This coordinated pressure tactic leaves Nvidia with limited room for strategic maneuvering.

The Lobbying Game: Too Much, Too Late?

Huang has long maintained that preserving Chinese dependence on American hardware ultimately serves U.S. interests. The rationale is that by keeping Chinese AI developers tethered to the Nvidia ecosystem, the U.S. retains essential technological leverage.

Following discussions with U.S. officials, there was brief optimism that Huang’s lobbying had gained ground. However, this proved short-lived, as Beijing has effectively shut Nvidia out of the market through national security reviews of its chips. Huang has acknowledged publicly that the company’s market share has been reduced to zero. The irony is evident: while Huang lobbied for relaxed sales regulations in Washington, Beijing simultaneously erected barriers to exclude Nvidia.

Huang’s comparison of China’s pro-industry energy subsidies with perceived excessive Western regulation reveals a core tension in Nvidia’s position. The company requires favorable policy from both capitals but now operates in a geopolitical landscape where pleasing one increasingly means antagonizing the other. This represents a fundamental shift, turning what was once a profitable market dynamic into a tight rope walk.

The Cost of Technological Nationalism

This is not simply a corporate challenge; it is reshaping the global AI landscape. Even should a deal be reached allowing for the resumption of advanced chip sales to China, China’s restrictions would eliminate foreign chipmakers, like Nvidia, from a substantial portion of the market.

Simultaneously, Chinese companies have secured over $100 billion in state funding for AI data center projects since 2021, establishing a substantial captive market for domestic alternatives. This orchestrated approach by Beijing is designed to accelerate its own AI ambitions and decrease reliance on foreign technology.

This policy reversal has tangible consequences. Trade discussions failed to yield any concessions on chip policy, with top U.S. officials pushing back against initial considerations to permit Nvidia to sell new AI chips to China.

An Nvidia spokesperson acknowledged the challenges directly when stating the company now assumes “zero share in China’s highly competitive market for datacenter compute, and do not include it in our guidance.”

China’s Calculated Response

Beijing’s strategies extend beyond simple retaliation. Government bodies have discouraged the purchase of advanced Nvidia chips by domestic tech giants, citing security concerns. Simultaneously, China has showcased new data centers powered entirely by domestically-produced AI chips, sending a clear message: foreign dependence is a vulnerability to be managed, and preferably, eliminated.

The Chinese government is actively carving out market share for domestic chipmakers, ranging from Huawei Technologies to smaller and emerging players. While these companies presently face challenges in terms of matching Nvidia’s performance and software ecosystem, they are receiving what they need most: guaranteed market access, patient capital, and time to mature their technologies and capabilities.

The Impossible Balance

Nvidia’s predicament highlights a broader reality concerning technology in an era of intense strategic competition: the middle ground is evaporating. Companies can optimize for U.S. national security priorities or Chinese market access, but increasingly not both. This necessitates difficult choices and calculated risk assessments.

Huang has expressed concerns that restrictive Western regulations are holding the West back, contrasting this with China’s energy subsidies aimed at lowering costs for local developers using domestic chips. But this comparison misses the crucial point.

The core issue isn’t whether China’s industrial policy is more effective; it’s whether Nvidia can operate effectively in an environment where technology has become inextricably linked to geopolitics. The B30A saga illustrates the potential futility of technical compromises. Even a chip deliberately weakened to comply with U.S. export controls fails to gain approval from Washington, while Beijing increasingly views any foreign chip as a strategic risk. Nvidia could design countless variants, each weaker than the last, and still potentially find itself shut out by one capital or the other, highlighting the complex web of regulations and political maneuvering.

What Comes Next?

In the short term, Nvidia faces a clear reality: the company now assumes zero revenue from China in all future forecasts. Realistically, Nvidia views any potential future developments in China as a “bonus.” This conservative outlook safeguards the stock but also indicates that management perceives no near-term solution to the present challenges.

The fundamental question is whether this represents a temporary standstill or a permanent separation. While the move boosts sales of domestically produced chips in China, it also potentially widens the U.S.-China gap in AI computing power, as U.S. tech giants continue investing heavily in data centers powered by Nvidia’s most advanced chips.

For Nvidia, the path forward likely involves increasing investment in markets where geopolitics align with business interests – the U.S., Europe, and allied Asian nations. The China dream, at least as previously envisioned, is likely over. Huang’s softening tone surrounding China’s AI dominance signifies a shift. While U.S. policy may not ensure victory by keeping China dependent on its chips, Nvidia stands to suffer should it remain caught in the crossfire.

The AI chip restrictions from both the U.S. and China extend beyond export controls and industrial policy. It suggests that in the AI race, there may be no more room for truly neutral suppliers. Technology companies are increasingly pressured to choose sides, and those who hesitate may find the decision made for them.

Nvidia’s dramatic decline from 95% to zero market share in China happened within a matter of months. The critical questions now are whether Washington and Beijing will ultimately allow any space for global tech companies to operate.