Washington’s Two-Way Squeeze: Nvidia’s China Dilemma Deepens as Legal Shipments Collide with Smuggling Crackdown

US allows limited Nvidia H300 exports to China while cracking down on smuggling, as Nvidia's China revenue drops 53% and market share expected to collapse to 8%.

The US government is simultaneously opening a narrow door for Nvidia’s H300 chips into China while hammering shut dozens of others — a contradiction that underscores the delicate balancing act in Washington’s export-control strategy for advanced semiconductors. The stock has been caught in the crosscurrents, closing on Wednesday at €182.68, down 1.57% from Tuesday’s €185.60, as investors digest news of both legal inroads and a sweeping purge of Asian buyers.

Jeffrey Kessler, Under Secretary of Commerce for Industry and Security, confirmed to Bloomberg that the first H300 processors have reached Chinese customers under licenses issued after President Trump greenlit the chip for export in December. Kessler described the volumes as “trivial” and declined to name buyers or quantities. Documents cited by Reuters, however, identified roughly ten license holders, including units of ZTE, Tencent and ByteDance. The H300 remains the only high-end Nvidia chip permitted for China; the far more powerful Blackwell series stays off-limits entirely.

The modest H300 flows stand in sharp contrast to a dramatic escalation in anti-smuggling enforcement across Asia. Nvidia has slashed its list of authorised buyers of advanced AI chips in Singapore, Malaysia and Japan by more than half, according to the Financial Times. The purge follows a series of raids and audits — including on-site data-centre visits, contract reviews and end-user interviews — that led to the removal of many “neo-cloud” providers suspected of funnelling chips to China. Those cut from the whitelist can reapply after rectifying compliance gaps.

The tightening was triggered by a high-profile smuggling case. US prosecutors recently charged a co-founder of Super Micro Computer with involvement in moving Nvidia chips worth $2.5bn into China. The pressure from Washington to close loopholes has been intensifying ever since, and a Commerce Department directive in May further clarified restrictions on companies with Chinese parent entities.

The paradox of allowing some H300 sales while throttling the broader Asian ecosystem has not changed the fundamental trajectory of Nvidia’s China business. Revenue from customers in China and Hong Kong plunged roughly 53% year-on-year to $4.55bn in the first quarter, down from $9.66bn, according to Nvidia’s own filings. Analysts now forecast the company’s share of China’s AI-GPU market will collapse from 66% in 2024 to just 8% by the end of 2026, as Beijing actively promotes domestic alternatives and discourages purchases of American chips.

Yet Nvidia’s global momentum shows no sign of slowing. Group revenue surged 85% to a record $81.6bn in the most recent quarter, driven by insatiable demand from US cloud giants. A newly disclosed $6.3bn deal with SpaceX, under which the Elon Musk-led company will pay roughly $150m per month for access to Nvidia’s GB300 chips — routed through Reflection AI — underscores the scale of the order book. Nvidia is also deepening industrial partnerships, including a joint venture with Mitsubishi Heavy Industries on cooling solutions and a collaboration with Siemens and Fluence on the NVL72 reference architecture for high-density AI infrastructure.

Technically, the stock remains in a holding pattern. Wednesday’s close sits just above the 50-day moving average of €181.86 and about 9.8% below the 52-week high of €202.50 reached in May. The relative strength index of 54.7 signals neutral territory. But the annualised 30-day volatility of 38.07% (and 38.11% in the secondary source) reveals how sensitive the shares remain to each new headline from Washington and Beijing. Over 12 months the stock has still gained 24.19%, and year-to-date it is up 13.40%.

For now, the competing forces — relaxed export rules for a handful of Chinese customers alongside a draconian purge of Asian intermediaries — keep Nvidia in a geopolitical bind that neither the legal H300 deliveries nor the SpaceX deal can easily resolve. Investors will continue watching for further signals from the Commerce Department and for any shift in Beijing’s policy towards domestic chip champions.