China’s AI Hunger Forces Nvidia to Rethink Supply as H200 Demand Explodes

Nvidia is reassessing how many of its powerful H200 artificial intelligence chips it can make after demand from Chinese companies surged far beyond current production levels, according to people familiar with the discussions. The spike in interest follows a major policy signal from Washington that reopened a narrow but lucrative channel for advanced AI hardware to flow into China.

Earlier this week, U.S. President Donald Trump said the government would permit Nvidia to export its H200 processors—its second-most powerful AI chip—to China, provided a 25% fee is collected on each sale. That announcement immediately triggered a wave of inquiries from Chinese technology giants eager to secure the most advanced computing power currently within their reach.

According to sources, the appetite has been strong enough that Nvidia is now leaning toward expanding production capacity for the H200, despite the chip not being the company’s primary manufacturing focus at the moment. The conversations are sensitive and ongoing, and those involved declined to be identified.

Nvidia has sought to reassure its global customers that any shift will not disrupt its broader supply commitments. In a statement issued after the report surfaced, a company spokesperson said Nvidia is carefully managing its supply chain so that licensed sales of the H200 to approved Chinese buyers will not affect deliveries to customers in the United States.

Interest from China’s tech sector has been swift and intense. Companies such as Alibaba and ByteDance have already contacted Nvidia to explore large-scale purchases, signaling how critical the chip has become for firms racing to build competitive AI systems. Yet the path forward is far from clear. While the U.S. has opened the door, Chinese regulators have not yet given formal approval for imports of the H200. Officials reportedly held emergency meetings to evaluate the implications and are expected to decide whether shipments will be allowed.

At the heart of the debate is scarcity. Only limited volumes of the H200 are currently being produced, as Nvidia has prioritized manufacturing its newer Blackwell architecture and the upcoming Rubin generation. This makes every allocation decision more complex, especially as global competition for advanced chipmaking capacity intensifies.

For Chinese buyers, the urgency is understandable. The H200, part of Nvidia’s Hopper generation, entered large-scale deployment last year and remains the most powerful AI chip China can realistically access today. Built by TSMC using its 4-nanometer process, the H200 dramatically outperforms the H20, a scaled-down chip Nvidia introduced in late 2023 specifically to comply with earlier export restrictions. By some estimates, the H200 delivers roughly six times the performance of that downgraded alternative.

China’s demand also exposes a strategic dilemma for Beijing. The government is actively trying to accelerate its domestic AI chip industry, yet local manufacturers still lag behind Nvidia’s capabilities. Analysts warn that allowing widespread access to the H200 could slow the adoption of homegrown accelerators that remain two to three times less powerful than Nvidia’s offering.

Market observers say this tension is already visible. Cloud providers and enterprise customers inside China are reportedly placing aggressive orders and pressing policymakers to loosen restrictions, at least under strict conditions. One proposal discussed during regulatory meetings would require each imported H200 to be bundled with a certain quota of domestically produced chips, an attempt to balance immediate performance needs with long-term industrial goals.

For Nvidia, the situation is equally delicate. Expanding H200 production comes at a time when the company is transitioning to new architectures and competing with rivals such as Alphabet’s Google for scarce advanced manufacturing slots at TSMC. Any capacity shift must be weighed against future product roadmaps and existing customer commitments.

What emerges is a familiar pattern in the AI era: explosive demand colliding with geopolitical caution and manufacturing limits. As China’s appetite for cutting-edge compute grows and Nvidia weighs how far it can stretch its supply chain, the H200 has become more than just a chip. It now sits at the intersection of technology, trade policy, and the global race for AI supremacy.