American semiconductor giant Nvidia (NVDA) is reportedly designing cheaper and simpler versions of its Blackwell artificial intelligence (AI) chips for export to China, to circumvent the new H20 chip export restrictions. The news was first reported by Reuters, citing sources familiar with the matter.
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Interestingly, the chipmaker is expected to begin mass production of these cheaper chips in June. The proposed chip will have weaker specifications compared to the current H20 models and will be produced using simple manufacturing techniques. Nvidia has said that the new chip restrictions will result in a $5.5 billion inventory write-off and the loss of nearly $15 billion in potential sales.
Here’s How Nvidia Will Skirt Chip Export Curbs
The new GPUs (Graphic Processing Units) will be part of Nvidia’s latest Blackwell family of processors, priced between $6,500 and $8,000 per unit, much lower than the $10,000 to $12,000 price tag of the advanced H20 GPUs. Moreover, the chip will use traditional GDDR7 memory to circumvent restrictions on exporting chips with high bandwidth memory (HBM), which is used in more advanced models.
Additionally, the chip will be based on Nvidia’s older RTX Pro 6000D processor, a server-class graphics processor. Finally, Nvidia will not use Taiwan Semiconductor Manufacturing’s (TSM) CoWoS (Chip-on-Wafer-on-Substrate) packaging technology for these chips.
Nvidia is exploring different strategies to continue exporting chips to China, which remains its second-largest market. This is the third time the chip giant is changing chip specifications to comply with the U.S.’ chip export restrictions. These export curbs have caused a sharp decline in Nvidia’s sales in China, down to 13% in Fiscal 2024.
CEO Jensen Huang recently stated that the company is steadily losing market share in China to domestic competitors, especially Huawei, with its share falling to 50% from 95% before the export restrictions first took effect in 2022. Huang expects China’s chip market to grow into a massive $50 billion sales market in the coming years and is determined to recapture a larger share.
According to Main Street Data chart, China has remained Nvidia’s second-largest revenue market after the U.S.
Is NVDA a Buy Before Earnings?
Ahead of Nvidia’s Q1FY26 results, Wall Street remains highly bullish about Nvidia’s long-term stock trajectory. On TipRanks, NVDA stock commands a Strong Buy consensus rating based on 34 Buys, five Holds, and one Sell rating. Also, the average Nvidia price target of $164.51 implies 25.3% upside potential from current levels. Year-to-date, NVDA stock has lost 2.2%.
