Nvidia Faces Production Challenge as Chinese Tech Giants Place Huge AI Chip Orders

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A surge in demand from China is set to define Nvidia's 2026, presenting both a significant opportunity and a formidable logistical test. According to reports, Chinese technology firms have placed orders worth millions for the company's artificial intelligence chips, but existing inventory falls far short of meeting this sudden wave of demand, triggering a race against time to scale up manufacturing.

Despite a share price advance of more than 38% over the past 12 months, Nvidia's equity presents an interesting valuation case at its current level of $186.50. The forward price-to-earnings (P/E) ratio stands at approximately 25, slightly below the average for the Nasdaq-100 index. Market sentiment remains strongly positive. The consensus analyst rating is a "Strong Buy," with a median price target of $250, implying an upside potential of roughly 36%. Researchers project earnings per share of $7.52 for the 2026 fiscal year. With a data center chip backlog of around $275 billion and renewed access to the Chinese market, the foundation for continued growth appears solid.

The H200 Supply Crunch

This new dynamic was triggered by the Trump administration's approval to resume sales of H200 chips to verified Chinese customers. The response from China was immediate and substantial: technology companies ordered over 2 million units for delivery in 2026. This figure starkly contrasts with the current available inventory of only about 700,000 units. To bridge this gap, Nvidia has instructed its manufacturing partner, Taiwan Semiconductor Manufacturing Company (TSMC), to drastically ramp up production. Initial shipments could arrive before the Chinese New Year in mid-February.

Key details of the order:
* Order Volume: In excess of 2 million H200 chips
* Current Stock: Just 700,000 units presently on hand
* Unit Price: $27,000 per chip (China-specific variant)
* Production Ramp: TSMC scale-up planned for Q2 2026

Offsetting Past Financial Setbacks

Financially, this development carries considerable weight for Nvidia. The reopening of the Chinese market could help compensate for a $5.5 billion write-down the company was forced to take in early 2025 due to export restrictions. Prior to those constraints, Nvidia was on track to sell $30 billion worth of AI chips in China. A company spokesperson emphasized that the licensed sales to China will not impact the supply for U.S. customers. This assurance is crucial as Nvidia concurrently focuses on its newer Blackwell series and the upcoming Rubin chips.