US Chipmakers Fear Ceding China's AI Market to Huawei After New Trump Restrictions

The Trump administration is 'taking measures to restrict the sale of AI chips by Nvidia, Advanced Micro Devices and Intel,' especially in China, reports the New York Times. But that's triggered a series of dominoes. 'In the two days after the limits became public, shares of Nvidia, the world's leading AI chipmaker, fell 8.4%. AMD's shares dropped 7.4%, and Intel's were down 6.8%.' (AMD expects up to $800 million in charges after the move, according to CNBC, while NVIDIA said it would take a quarterly charge of about $5.5 billion.)

The Times notes hopeful remarks Thursday from Jensen Huang, CEO of Nvidia, during a meeting with the China Council for the Promotion of International Trade. 'We're going to continue to make significant effort to optimize our products that are compliant within the regulations and continue to serve China's market.' But America's chipmakers also have a greater fear, according to the article: 'that their retreat could turn the Chinese tech giant Huawei into a global chip-making powerhouse.'
'For the U.S. semiconductor industry, China is gone,' said Handel Jones, a semiconductor consultant at International Business Strategies, which advises electronics companies. He projects that Chinese companies will have a majority share of chips in every major category in China by 2030... Huang's message spoke to one of his biggest fears. For years, he has worried that Huawei, China's telecommunications giant, will become a major competitor in AI. He has warned U.S. officials that blocking U.S. companies from competing in China would accelerate Huawei's rise, said three people familiar with those meetings who spoke on the condition of anonymity.
If Huawei gains ground, Huang and others at Nvidia have painted a dark picture of a future in which China will use the company's chips to build AI data centers across the world for the Belt and Road Initiative, a strategic effort to increase Beijing's influence by paying for infrastructure projects around the world, a person familiar with the company's thinking said...

Nvidia's previous generation of chips perform about 40% better than Huawei's best product, said Gregory C. Allen, who has written about Huawei in his role as director of the Wadhwani AI Center at the Center for Strategic and International Studies. But that gap could dwindle if Huawei scoops up the business of its American rivals, Allen said. Nvidia was expected to make more than $16 billion in sales this year from the H20 in China before the restriction. Huawei could use that money to hire more experienced engineers and make higher-quality chips. Allen said the U.S. government's restrictions also could help Huawei bring on customers like DeepSeek, a leading Chinese AI startup. Working with those companies could help Huawei improve the software it develops to control its chips. Those kinds of tools have been one of Nvidia's strengths over the years.
TechRepublic identifies this key quote from an earlier article:

'This kills NVIDIA's access to a key market, and they will lose traction in the country,' Patrick Moorhead, a tech analyst with Moor Insights & Strategy, told The New York Times. He added that Chinese companies will buy from local rival Huawei instead.

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