In the rapidly evolving race between the United States and China to dominate artificial intelligence, the hardware and computing power segment is witnessing a dramatic shift. Nvidia, once the unchallenged leader in China's AI chip market, is now losing ground to domestic giant Huawei as Beijing pushes for technological self-sufficiency and US export restrictions reshape the competitive landscape.

Jensen Huang, CEO of California-based Nvidia, became an internet sensation during a visit to Beijing for a summit between US President Donald Trump and Chinese leader Xi Jinping. But even his celebrity status — complete with noodle-eating street scenes — could not reverse the company's declining sales of advanced AI chips in China. The US controls imposed on exports of high-tech semiconductors, citing national security, initially blocked Nvidia's most powerful H200 AI chips. By the time Trump agreed to allow their sale, China's government had already shifted its procurement policies to favor domestically designed chips from Huawei and other local manufacturers.

Huang has publicly acknowledged that the United States has lost its competitive edge in China's advanced AI chips market. “We had about 95 percent market share before the export control banned us out of China. Now we are competing just fine — but the market has changed,” he said in an interview with the Associated Press. He emphasized the need to balance national security with commercial competition: “We have to make sure that we protect our nation, but we also should go and compete and grow our technology industry and maximize our exports.”

Huawei Takes the Lead Among Chinese Chipmakers

Since the US placed Huawei on an export blacklist in 2019, preventing it from buying advanced chips and chipmaking equipment, Chinese semiconductor firms have accelerated their self-reliance efforts. Huawei, the world's largest telecommunications equipment supplier, has become the most prominent domestic chip developer. The company's Ascend 950 series AI chips are now considered roughly comparable to Nvidia's H200, one of Nvidia's most powerful products, according to industry analysts.

According to a report by Bernstein, a global equity research firm, Nvidia held about 40 percent of China's AI chip market in 2025, roughly matching Huawei's share. However, Bernstein predicts that by the end of 2026, Nvidia's share will shrink to around 8 percent, while Huawei's will grow to about 50 percent. This rapid reversal underscores the impact of both US export controls and China's determined push for self-sufficiency.

Antonia Hmaidi of the Mercator Institute for China Studies, who focuses on semiconductor policy, noted: “Nvidia has definitely lost significant ground to Huawei, which now leads domestically.” Huawei's ascendancy is not just about market share; its AI computing clusters, combining thousands of chips, are performing at levels comparable to those of global rivals, despite reliance on Chinese-made semiconductors due to US restrictions.

He Hui, director of semiconductor research at Omdia, observed: “China now believes in its own self-sufficiency and supply capabilities. This confidence drives both policy and procurement decisions.”

Nvidia Maintains Global Dominance But China Pivots

Nvidia still designs the world's most powerful AI chips, relies on Dutch ASML's extreme ultraviolet lithography machines, and uses Taiwan's TSMC for fabrication. These technologies are unavailable to China due to export controls. However, within the Chinese market, demand for Nvidia's chips continues to exceed supply, evidenced by several recent smuggling cases attempting to circumvent controls.

Despite the pivot, Chinese universities and major tech companies still want Nvidia's H200 chips for research and development. DeepSeek, a fast-growing Chinese AI model developer rivaling OpenAI's ChatGPT, initially trained its models on Nvidia hardware. In April 2026, DeepSeek announced that its latest V4 model was adapted for Huawei's Ascend chips, signaling a major milestone for domestic hardware adoption. Paul Triolo of DGA-Albright Stonebridge Group suggested there is significant collaboration between DeepSeek and Huawei to train future models on domestic chips.

Morningstar analyst Phelix Lee commented: “It shows that Chinese-made chips can potentially replace Nvidia ones. But we don't expect an abrupt switch toward Ascend.” Nvidia has engineered a stripped-down H20 chip for the Chinese market to comply with US rules, but shipments have been declining. Huang stated in Nvidia's recent shareholders meeting that the company has not sold H200 chips in China and remains uncertain if imports will ever be allowed.

Meanwhile, Nvidia's global sales continue to surge, with expected revenue of around $91 billion in the May-July quarter, up from $82 billion in the prior quarter, excluding data center compute revenue from China. The company's annual revenue reached nearly $216 billion, while Huawei reported $126 billion for a comparable period.

Huawei's Global Ambitions and China's Long-Term Strategy

Huawei operates in 170 countries and regions, with a mission of “bringing digital to every person, home and organization for a fully connected, intelligent world.” Its chip division is now expanding globally. While China's advanced chip manufacturing capacity remains insufficient to meet domestic demand, as production scales up and costs drop, Huawei could gain market share in Southeast Asia and other regions.

Analyst Brady Wang of Counterpoint Research noted: “China's strategy of pursuing technological self-sufficiency — and eventually exporting its technologies — is unlikely to change, regardless of whether Nvidia can sell its chips in China.” The broader US-China tech rivalry shows no signs of easing. Washington's export controls, initially imposed under the Trump administration and largely continued under President Biden, have inadvertently accelerated China's push for homegrown alternatives. Even if trade tensions ease, as hinted by recent diplomatic engagements, the structural shift toward domestic AI chips in China appears irreversible.

He Tingbo, head of Huawei's semiconductor business, when asked how Huawei's chip technology compares to its rivals, replied: “We have found pretty good solutions. Who can walk faster? Huawei or other companies? I don't know the answer. Only time will tell.”

Advanced chip manufacturing remains a global supply chain, with no single country able to build a cutting-edge AI chip entirely on its own. China still relies on foreign equipment and materials for some critical steps, but it is investing heavily in developing indigenous alternatives. The outcome of this technological race will not only shape the AI industry but also influence global power dynamics for decades to come.

As of mid-2026, Nvidia's H200 chips are still not authorized for sale in China, and the company has yet to record any revenue from them. Meanwhile, Huawei continues to expand its Ascend ecosystem, partnering with major Chinese AI firms and research institutions. The balance has shifted: Nvidia may still dominate the global market, but within China's borders, the giants are now local.

Source: BusinessLine News