Nvidia’s (NVDA) business is booming, but one sector of the market remains a seemingly impenetrable quagmire for the world’s leading chip designer: China.
For years, Nvidia CEO Jensen Huang has struggled to gain a foothold in the world’s second-largest economy, largely because of restrictions imposed by the Commerce Department, which regulates international chip sales. Seeking progress, Huang has repeatedly urged the White House to ease these restrictions, which the administration views as necessary for national security and for the United States to stay ahead in the AI race.
When Nvidia last released its results, the forecasts once again omitted sales forecasts for China, continually dogged by state politics.
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The complex relationship between Nvidia and China was brought back into the open Thursday after The New York Times reported on new U.S. intelligence efforts. U.S. intelligence, according to the report, believes that a Chinese national named Alice Huang — who served as an executive at chip customer Nvidia Megaspeed and has a well-documented relationship with Huang himself — acted as an intelligence agent and passed information to the ruling party in Beijing.
The report raises major questions about Nvidia’s potential information leaks to China, not only regarding trade secrets but also Jensen Huang’s deepening ties to the White House as he pushed for an easing of 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 about the security implications of AI as a “scam.”
“Persistent geopolitical uncertainty”
The race between the United States and China to develop and disseminate their own AI technology has, in recent years, become a major concern for leaders of both governments.
While China has matched or even surpassed the United States in developing and distributing “open-weight” AI models, which are often far less expensive than “closed-weight” alternatives, pioneering American labs such as Anthropic (ANTH.PVT) and OpenAI (OPAI.PVT) have retained the lead in developing the most advanced models.
These advanced models are powered by chips designed by Nvidia, whose core semiconductors are often considered the benchmark for computing performance. While the chips are extremely popular in the United States 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 advantage over Beijing.
President Trump greets Nvidia CEO Jensen Huang during a press briefing following a meeting on artificial intelligence outside the West Wing of the White House, September 29, 2026. (Kevin Dietsch/Getty Images) ·Kevin Dietsch via Getty Images
Huang scored a victory for his company in December 2025 when he won approval from the Trump administration for Nvidia to export H200 chips to Chinese buyers, a policy change that came amid $5 million in lobbying by Nvidia throughout the year. Even chip models like the H200, which are now several generations behind Nvidia’s flagship products, remain competitive for Chinese buyers thanks to options available from companies like Huawei Technologies.
Still, sales of the H200 represented less than 1% of Nvidia’s $89 billion in data center revenue for the second quarter, Nvidia said. Some of this sales weakness also comes from Beijing, which recently moved to block Chinese buyers from purchasing Nvidia chips as Xi Jinping’s government seeks to reduce its reliance on American technology, turning instead to local alternatives like Huawei.
Given “continuing geopolitical uncertainty,” Colette Kress, Nvidia’s chief financial officer, told analysts, “there is no China data center compute revenue in our outlook.”
While it’s unclear how many H200 chips Nvidia sold to Chinese buyers in the second quarter, those sales fell below the U.S.-approved maximum due to blockades imposed by the Chinese government, the company said.
“In the current geopolitical and regulatory environment, we are unable to create and deliver a competitive product for broad distribution in the Chinese data center market, with the approval of the U.S. government and the Chinese government,” Nvidia said in its second-quarter earnings report.
Smuggling problems
The restrictions haven’t stopped Chinese buyers from looking for workarounds to get some of the world’s best chips.
Since the U.S. government imposed its sales restrictions on Nvidia, a parallel market has arisen in response, according to public reports and investigations by the Justice Department. Buyers and sellers in unrestricted Southeast Asian countries import chips under legitimate guises, then change labels, change packaging or use other methods to disguise the true contents of the package before sending the chips to China, news reports and the U.S. government have claimed.
In China, users of Douyin, the domestic version of TikTok, are openly peddling sanctioned chips such as Nvidia’s Blackwell B300, priced at several million US dollars per server, in videos reviewed by Yahoo Finance. Such sales would likely violate Commerce Department restrictions.
Megaspeed, the Singapore-based company that employed Alice Huang, has been under investigation by U.S. authorities for more than a year over concerns that the company was shipping Nvidia’s most advanced chips to data centers across Southeast Asia that serve Chinese companies or was shipping the physical chips directly to China through middlemen, according to the New York Times.
President Trump and Chinese President Xi Jinping visit the Temple of Heaven in Beijing, May 14, 2026. (Brendan Smialowski/Pool Photo via AP, File) ·Brendan Smialowski/PoolAFP via AP
Nvidia has repeatedly said there is no evidence its chips are being smuggled into China, and the company told the New York Times that if anyone close to the company poses a “threat to U.S. industry,” Nvidia is confident the U.S. government would notify the company. The company added that while Huang often speaks with clients, those conversations never include “information relevant to national security.”
Still, for Huang and Nvidia, the headlines are a reminder of the geopolitical tensions inherent in the AI business.
While it is in Nvidia’s interest to serve as broad a customer base as possible, national security concerns in Washington continue to interfere with the company’s ability to sell in the world’s second-largest economy, where buyers have proven willing to pay premium prices for its products.
Correction: A previous version of this story misstated where Huang answered 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.
