March 26 – Nvidia (NASDAQ:NVDA) shares saw a decline on Wednesday morning, shedding about 4% after the news that China regulators pushed for stricter environmental standards. The country’s National Development and Reform Commission (NDRC) wants companies to use chips that meet its new efficiency standards. Nvidia’s H20 chip doesn’t make the cut.
Big names like Alibaba (NYSE:BABA), ByteDance, and Tencent (TCEHY) are advised to steer clear of these chips. The H20 was designed to fit within U.S. export limits, but China’s shifting policies are making things tricky.
China is Nvidia’s fourth-largest market, bringing in $17.1 billion, 13% of its total sales. Demand for the H20 chip has been strong, thanks to AI projects like DeepSeek. Analysts estimate that Nvidia could ship up to 1 million H20 chips in 2024. But if China enforces these energy rules, those numbers could take a hit.
Nvidia isn’t standing still. The company is looking to negotiate with Chinese regulators and tweak the H20 chip to comply. The catch? Any changes could lower efficiency and weaken its competitive edge.
Trade tensions aren’t helping. U.S. restrictions on AI chip exports have already limited Nvidia’s reach in China. At the same time, Beijing is pushing local firms to invest in homegrown semiconductor technology.
With energy rules tightening and trade pressures growing, Nvidia faces a tough road ahead in one of its most important markets.
This article first appeared on GuruFocus.
