Nvidia’s China Problem Isn’t U.S. Policy—It’s the Reality of Geopolitics and National Security

Nvidia's Earnings and CEO's Critique on U.S. Chip Export Controls

Nvidia reported strong earnings, yet CEO Jensen Huang voiced sharp criticism of U.S. export controls on AI chips targeting China. Huang labeled these policies a “failure,” blaming administrations from both parties for a significant decline in Nvidia’s China market share and revealing a multi-billion dollar write-down on unsold chips blocked by restrictions.

He argued that export controls have accelerated China’s innovation, intensifying competition rather than curbing it. Huang’s comments highlight a tension between commercial interests and national security priorities in U.S. semiconductor policy.

Huang’s Perspective on U.S. Export Controls

At Computex in Taipei, Huang’s post-keynote remarks dominated headlines for their political implications. He said the U.S. operates under the false premise that China cannot produce advanced AI chips, calling this assumption “clearly wrong.”

During Nvidia’s earnings call, Huang described China as “effectively closed” to U.S. companies and claimed that export restrictions have spurred rapid Chinese innovation. He emphasized that China already possesses AI capabilities, challenging U.S. policy assumptions.

China’s Progress in AI and Tech Independence

China’s AI advancements are evident, exemplified by companies like DeepSeek launching competitive generative AI models. Yet, the export controls were never meant to protect Nvidia’s profits; they aim to safeguard U.S. national security.

Advanced semiconductors enable modernization of China’s military systems, including intelligence and surveillance. The policies reflect a strategic imperative to prevent U.S.-designed technology from enhancing a key geopolitical rival’s military capabilities.

Longstanding Drive for Chinese Tech Self-Reliance

China’s push for semiconductor independence predates recent U.S. controls. The “Made in China 2025” initiative, launched in 2015 with over $150 billion in support, aimed to reduce reliance on foreign chipmakers. Export restrictions responded to, rather than initiated, this effort.

Huang acknowledged that half of the world’s AI developers are in China, stressing the importance of maintaining U.S. IT infrastructure as a global base. However, China pursues its own strategic goals independently of U.S. export policies, often favoring domestic firms.

China’s Evolving Innovation Model

China combines global technology access with substantial capital investments and industrial policies to compete across sectors like green tech, electric vehicles, and high-speed rail. While it leverages foreign know-how, China also moves quickly to develop indigenous capabilities.

The U.S. faces the challenge of protecting leading-edge technologies to delay their diffusion. History shows sectors where the U.S. failed to act—such as solar panels and telecom—saw China achieve global dominance. Conversely, strong export controls in aviation have helped the U.S. maintain a technological edge over China.

Nvidia’s Position in China and Market Dynamics

Nvidia’s experience in China follows a familiar pattern: foreign companies initially gain market share but are eventually displaced. Apple, Tesla, and Starbucks have faced similar trajectories. Huang’s claim that U.S. policy caused Nvidia’s market decline overlooks this broader trend.

Despite concerns, Nvidia’s overall performance remains robust. Since 2022, its stock has surged more than tenfold, with data center revenue growing 217% year-over-year. The latest quarter showed 69% revenue growth overall, and 73% in the data center division, driven by strong demand outside China.

The Real Risk: Policy Disruption, Not Failure

The true risk lies not in the effectiveness of export controls but in potential policy changes driven by lobbying or shifting political priorities. For example, the Biden-era AI diffusion rule was rolled back under the Trump administration, raising concerns among security officials.

Nvidia’s success should motivate the company to focus on competing globally rather than lamenting losses in China. Huang’s public criticism has drawn a firm response, reinforcing government resolve to maintain strategic export controls.

Conclusion: Prioritizing National Security Over Market Access

U.S. semiconductor policy is about preserving strategic advantage, not protecting individual company profits in China. The challenge is to defend critical technologies that shape future geopolitical power, even if it means retreating from markets that won’t stay open indefinitely.

Executives and strategists should recognize that decisions in this space often prioritize national security and long-term stability over short-term commercial gains. Success demands adapting to this reality and aligning business strategies accordingly.