The U.S. government has approved around 10 major Chinese technology companies to purchase Nvidia's advanced H200 artificial intelligence chips, yet the deals remain frozen as both Beijing and Washington navigate competing strategic interests and security concerns that threaten to lock China out of critical computing infrastructure.
The Commerce Department's approval of companies including Alibaba, Tencent, ByteDance, and JD.com marks a potential opening in U.S. export restrictions that have severely constrained China's access to cutting-edge AI technology. However, according to sources familiar with the matter, Chinese firms have pulled back from completing purchases after receiving guidance from Beijing, leaving the licensing approval effectively dormant.
Nvidia CEO Jensen Huang traveled to China this week as part of a delegation led by President Donald Trump, seeking to unlock the stalled transaction. Trump picked up Huang in Alaska en route to a summit with Chinese President Xi Jinping, signaling the commercial stakes involved in the broader diplomatic engagement. On Thursday, Huang told state broadcaster CCTV that he hoped Trump and Xi would build on their good relationship to improve bilateral ties.
The Scale of Lost Market Access
Before U.S. export restrictions tightened, Nvidia commanded approximately 95% of China's advanced chip market. China once accounted for 13% of Nvidia's revenue, and Huang has previously estimated the country's AI market alone would be worth $50 billion this year. The current deadlock represents a dramatic reversal: Huang has warned that U.S. export controls have eroded the company's foothold so severely that its share of AI accelerators in China has effectively fallen to zero.
Under the licensing terms, each of the approximately 10 approved Chinese companies—including distributors Lenovo and Foxconn—can purchase up to 75,000 H200 chips, either directly from Nvidia or through authorized intermediaries. Lenovo confirmed its approval status in a statement to Reuters, but Nvidia, Alibaba, Tencent, ByteDance, JD.com, and Foxconn declined to comment on the arrangement.
Competing Strategic Calculations
Beijing's hesitation to proceed reflects a deliberate policy choice. According to Commerce Secretary Howard Lutnick's testimony at a Senate hearing last month, "the Chinese central government has not let them, as of yet, buy the chips, because they're trying to keep their investment focused on their own domestic industry." This strategy aims to protect China's nascent AI chip sector from being overwhelmed by superior foreign technology.
China's domestic alternatives, while still lagging Nvidia's capabilities, have gained traction. Firms like DeepSeek increasingly tout their reliance on domestic chips, including those developed by Huawei, signaling Beijing's commitment to technological self-sufficiency in a critical sector.
The Chinese government's recent actions underscore this priority. The State Council has issued supply chain security regulations that have prompted a government-wide effort to identify and eliminate potential foreign dependencies in critical technology infrastructure. This scrutiny has intensified pressure within Beijing to block or tightly vet the Nvidia orders.
Structural Obstacles on Both Sides
The path to completing any sale faces substantial regulatory hurdles. U.S. rules issued in January require Chinese buyers to demonstrate they have installed "sufficient security procedures" and will not use the chips for military purposes. Nvidia must also certify sufficient inventory in the United States.
Trump negotiated an arrangement under which the U.S. would receive 25% of revenue from chip sales—a structure that requires chips to pass through U.S. territory before being shipped to China, as U.S. law does not permit direct export fees. This requirement has prompted unease in Beijing over potential tampering or hidden vulnerabilities, even as sources describe it primarily as a legal workaround.
Competing Interests in Washington
The continued delay has been welcomed by China hardliners in Washington. Chris McGuire, senior fellow for China and emerging technologies at the Council on Foreign Relations, stated that "any deal that allows Nvidia to sell more chips to China means fewer Nvidia chips for U.S. firms, and a smaller U.S. lead in AI over China." McGuire added, "It is remarkable that President Trump keeps getting convinced to put Nvidia's interest ahead of America's."
This critique highlights the tension between corporate commercial interests and broader national technology competition. The approved sales would represent a significant commercial victory for Nvidia but raise questions about whether such arrangements serve the longer-term strategic interests of U.S. technological leadership in artificial intelligence.
Why This Matters:
This deadlocked transaction illuminates fundamental questions about how democracies manage technology competition in an era of AI dominance. The U.S. restrictions aim to preserve American technological advantage, yet they also demonstrate the limits of unilateral export control as a policy tool—Chinese firms can simply decline to purchase, and Beijing can accelerate domestic alternatives. The 25% revenue-sharing arrangement represents an unusual attempt to monetize national security policy, raising concerns about whether commercial interests are being embedded into strategic decisions. For workers and communities dependent on U.S. tech sector leadership, the outcome of this competition matters significantly. Simultaneously, China's decision to prioritize domestic chip development reflects a legitimate concern about technological sovereignty. The stalled deal underscores how technology competition increasingly operates outside traditional market mechanisms, with governments on both sides making strategic choices that prioritize long-term competitive positioning over immediate commercial gain.