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Nvidia (NVDA, Financials) is redesigning its H20 chip to keep selling AI hardware in China, its third-largest market, after fresh U.S. export restrictions halted the original version.
Nvidia told key Chinese clients, including cloud providers, that the revised chip should be ready by July. To stay within U.S. limits, the chip will ship with lower memory and reduced performance.
The company has drawn up new technical thresholds to guide development. While the downgrade limits capabilities, some customers may still be able to tweak configurations to get more power.
The H20 was Nvidias most advanced chip approved for China. It was designed after earlier U.S. restrictions in 2023 and saw demand from giants like Tencent, Alibaba, ByteDance, and startups building affordable AI models. Orders reportedly reached $18 billion since January.
China brought in $17 billion in sales for Nvidia last fiscal year. CEO Jensen Huang visited Beijing last month to reinforce that the country remains a top priority.
The U.S. Commerce Department hasnt commented on Nvidias updated approach. For investors, the key question is whether this workaround can keep China revenue steady without high-end specs.
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This article first appeared on GuruFocus.