Nvidia Demands Full Payment Upfront for H200 AI Chips in China – NVDA Stock Reacts

Nvidia slaps a cash-upfront mandate on its coveted H200 AI chips for Chinese buyers—no credit, no exceptions.

The New Rules of Engagement

Gone are the days of net-30 payment terms. Nvidia's move tightens the financial screws, forcing Chinese tech firms and data centers to pony up the entire sum before a single chip ships. It's a stark shift in a market where leverage is everything.

Why the Hardline Stance?

Analysts point to escalating geopolitical tensions and complex export controls. By demanding full prepayment, Nvidia insulates itself from potential payment freezes or sudden regulatory blockades. It's a defensive financial maneuver in a high-stakes tech cold war.

The Ripple Effect

Expect supply chain recalibrations. Chinese AI ambitions—from large language model training to autonomous systems—now face a higher capital barrier to entry. Smaller players might get squeezed out, while giants with deep pockets secure their slice of silicon.

A Cynical Finance Jab

Wall Street shrugged—liquidity risk transferred to clients just means smoother quarterly cash flow projections. Another masterclass in offloading operational friction onto the customer, neatly packaged as a 'strategic pivot.'

The bottom line? In the global scramble for AI supremacy, cash is king, and trust is a liability. Nvidia isn't just selling chips anymore; it's dictating the terms of the arms race.

TLDR

• Nvidia now requires Chinese customers to pay the full amount upfront for H200 AI chip orders with no cancellations or refunds allowed
• Chinese companies have ordered over 2 million H200 chips priced at $27,000 each, exceeding Nvidia’s current inventory of 700,000 chips
• Beijing has asked tech firms to pause new H200 orders while regulators decide how many domestic chips must be purchased alongside each H200
• The strict payment terms shift financial risk to buyers as China’s approval timeline remains unclear
• Nvidia took a $5.5 billion inventory write-down last year after sudden export bans, prompting the company to protect itself with stricter terms

Nvidia has changed how it sells AI chips to Chinese customers. The company now requires full payment upfront for its H200 chips before orders can be placed.

NVIDIA Corporation, NVDA

The new terms eliminate flexibility for buyers. Once an order is submitted, customers cannot cancel, request refunds, or change configurations. In some cases, buyers can use commercial insurance or pledged assets as collateral instead of cash.

The stricter approach marks a shift from Nvidia’s previous policy. The company historically required advance payments from Chinese clients but often accepted partial deposits rather than full payment.

Regulatory Uncertainty Drives Policy Change

Beijing has not yet clearly approved H200 shipments to China. This uncertainty has pushed Nvidia to tighten its sales terms.

Chinese authorities recently asked local tech companies to temporarily pause new H200 orders. Regulators are still determining how many domestically produced chips companies must purchase alongside each H200 order.

The Biden administration previously banned advanced AI chip exports to China. President Donald TRUMP reversed that policy last month, allowing H200 sales with a 25% fee paid to the U.S. government.

China has since banned shipments of the H20 chip. The H20 was the most powerful product Nvidia could previously sell in China.

Demand for the H200 remains strong despite regulatory hurdles. Chinese technology companies have placed orders for more than 2 million H200 chips. Each chip costs approximately $27,000.

Nvidia’s current inventory stands at 700,000 H200 chips. This falls well short of the order volume from Chinese buyers.

Strong Performance Fuels Demand

The H200 delivers roughly six times the performance of the now-blocked H20 chip. Nvidia had designed the H20 specifically for the Chinese market.

Chinese chipmakers like Huawei have developed AI processors including the Ascend 910C. However, their performance still lags behind Nvidia’s H200 for large-scale training of advanced AI models.

Nvidia CEO Jensen Huang said customer demand for H200 chips remains “quite high.” The company has ramped up its supply chain to increase production.

Huang indicated he did not expect China’s government to make a formal declaration on approval. He suggested that if purchase orders come through, it means customers are able to place them.

Chinese internet giants including ByteDance view the H200 as a major upgrade. The chip is currently Nvidia’s second-most powerful offering.

Nvidia plans to fulfill initial orders from existing stock. The first batch of H200 chips is expected to arrive before the Lunar New Year holiday in mid-February.

The company has approached Taiwan Semiconductor Manufacturing Co about ramping up H200 production. Additional manufacturing is expected to begin in the second quarter of 2026.

The payment structure transfers financial risk from Nvidia to its customers. Buyers must commit capital without certainty that Beijing will approve chip imports.

Nvidia has reason to be cautious about China sales. Last year, the company wrote down $5.5 billion in inventory after the Trump administration abruptly banned it from selling the H20 chip to China.

China plans to approve some H200 imports as soon as this quarter, according to Bloomberg. Chinese officials are preparing to allow purchases for select commercial uses while barring the military, sensitive government agencies, critical infrastructure, and state-owned enterprises.