Nvidia’s China Gambit: New Risks Emerge — Should Investors Hold or Fold?

Nvidia hits another regulatory wall in China—just as AI demand explodes globally.

Geopolitical Tightrope

New export restrictions threaten to slice Nvidia's access to one of its largest markets. The chip giant now scrambles to redesign products that comply with tightened US trade rules—while Chinese clients hunt for alternatives.

Supply Chain Whiplash

Customs delays, licensing hurdles, and rising competition from local players like Huawei squeeze Nvidia's regional revenue. Meanwhile, Beijing pushes hard for semiconductor self-sufficiency.

Investor Dilemma: Patience or Panic?

Short-term pain looks inevitable. Long-term? Nvidia’s tech lead remains formidable, but navigating US-China tensions requires a circus act—and Wall Street hates uncertainty almost as much as missing earnings. Maybe diversify beyond stocks… ever considered Bitcoin? Just saying.

The backdoor issue

The new developments are connected to Nvidia's H20 high-functioning chips, which the company had made specifically for the Chinese market to comply with U.S. export restrictions on advanced artificial intelligence (AI) chips. The chips have been in the news a lot this year. You may remember that in the first quarter of fiscal 2026, Nvidia disclosed it took a $4.5 billion inventory charge because export restrictions prevented it from selling the H20 chips.

Then this summer, Nvidia struck a deal with the TRUMP administration that would open the Chinese markets to them in exchange for 15% of revenues from the H20 sales.

While the export restrictions seem to be handled, Nvidia is now facing additional problems from Beijing. China reportedly asked tech companies and AI developers not to use the H20 chips, particularly for government purposes. Beijing also approached Nvidia to ask if the chips have tracking technology that WOULD allow them to be operated remotely. CEO Jensen Huang said the company assured the Chinese government that backdoors do not exist, but the discussions are continuing.

"As you know, [Beijing] requested and urged us to secure licenses for the H20s, for some time and I've worked quite hard to help them secure the licenses, and so hopefully this will be resolved," he told reporters in Taiwan, according to CNBC.

Media outlet The Information reported Friday that Nvidia is now asking some of its suppliers, includingand. Reuters reported that Nvidia also askedto stop H20 production.

That's news that could frighten investors -- Nvidia stock is up over 30% so far this year, and sentiment has been high that the resumption of H20 sales could further fuel returns.

Image source: Getty Images.

Earnings are around the corner

Nvidia and Huang will surely have a lot to say about the H20 issue when Nvidia reports its fiscal 2026 Q2 earnings after the closing bell on Aug. 27. Analysts at Yahoo! Finance are expecting earnings per share of $1.01, versus $0.68 per share a year ago. The consensus revenue estimate is $46.12 billion, up 53% from the same quarter a year ago.

Nvidia is a powerhouse because of its overwhelming power in the graphics processing unit (GPU) market, where it's estimated to have more than 90% of the market share. And as some of the company's biggest customers said they intend to increase spending in their data centers to further power the AI and advanced computing platforms, Nvidia appears to be in a solid position for this week's report -- even without the Chinese H20 sales.

In fact, I'm suggesting that Nvidia's plan to scale back production, even temporarily, is a good one. The company already has billions of dollars in H20 inventory and took a huge charge in the first quarter because it wasn't able to MOVE the product. Why keep building when roadblocks keep popping up in Washington and now Beijing?

Analysts surely aren't concerned. In fact, many increased their price targets on Nvidia stock in recent days.

Source: Yahoo! Finance

I'm fully expecting a solid earnings report on Aug. 27, but like other investors, I'll be keenly interested in the H20 developments. When Nvidia is finally able to freely sell in China, it will be another tailwind for the biggest publicly traded company on the planet. But it's not the only positive catalyst for Nvidia stock.