The Trump administration has placed tight restrictions on the sales of U.S. semiconductors to China, with a goal of blocking China’s rapid artificial intelligence (AI) growth. Yet some experts fear that these very controls may help boost China’s AI prospects by forcing Chinese companies to buy from Huawei, a Chinese-based chip vendor.
The concern is that Huawei could use this extra revenue to develop expertise and market share that will enable it to become the dominant AI chip vendor, pushing aside American leaders like NVIDIA, Intel and AMD.
The key development happened this past week when the Trump administration placed restrictions on U.S. chip sales to China that amounted to a complete embargo. Earlier regulations created by the Biden administration restricting U.S. chip sales to China prompted NVIDIA to redesign one of its top AI chips into a lower capacity format, the H20 chip, for sales to China (the H20 was one of the chips was used to train DeepSeek). Now with new restrictions, even chips at this limited level will be blocked; NVIDIA announced a $5.5 billion charge against revenue, causing its stock to tumble. Similar falls were seen in the stocks of AMD and Intel.
Before the recent news, leading Chinese tech vendors Alibaba, ByteDance and Tencent had boosted their orders for the H20 chips, likely inspired after DeepSeek’s success revealed that these chips could support powerful AI modeling.
“By restricting the H20 system, U.S. regulators are effectively pushing Nvidia’s Chinese customers toward Huawei’s AI chips,” said Nori Chiou, Investment Director at White Oak Capital Partners, based in Singapore. “Huawei’s chip design and software capabilities are likely to advance quickly as it gains more customers and development experience.”
Patrick Moorhead, founder and CEO of Moor Insights & Strategy, was even more direct. “This kills Nvidia’s access to a key market, and they will lose traction in the country,” he said to the New York Times. “Chinese companies are just going to switch to Huawei.”
However, Daniel Newman, CEO and chief analyst at the Futurum Group, dismissed suggestions that Huawei would become a dominant chip supplier for U.S. and European companies. He notes an earlier time period when Huawei marketed cheap but capable telecom infrastructure. Many pundits at the time forecast that Huawei would become so dominant that Western tech providers would no longer be competitive in the global market.
“Then you remember what happened?” Newman tweeted on X. “We found out China put a backdoor in all of the infrastructure and then all that infrastructure had to be ripped out.”
Given this precedent, there’s no chance that Huawei will become the dominant vendor and displace current leaders like NVIDIA, Broadcom, AMD and Intel, he wrote “Maybe Iran and North Korea. But the idea Huawei with lower specs and poor software displaces Western tech,” is not realistic. “We’ve seen this movie before. [It] won’t be different this time.”
Moreover, he concluded, “China will be build competitive AI for China. But until China stops stealing IP and hacking infrastructure, the world will reject it.”
