For over a decade, Nvidia enjoyed a near-monopoly in China’s high-end AI sector. However, as of January 22, 2026, a combination of regulatory “strings” and local innovation has fundamentally altered the competitive balance.
The Factors Driving the Decline
Analysts point to three critical pressures that have eroded Nvidia’s dominance:
1. The “Huawei 50%” Milestone
Chinese national champion Huawei is the primary beneficiary of Nvidia’s retreat. Reports suggest Huawei is on track to control 50% of the Chinese AI chip market by 2026.
- Ascend 910C: Huawei’s latest chip is reportedly achieving 60-80% of the performance of Nvidia’s H100, which has become “good enough” for most Chinese hyperscalers like Baidu and Tencent.
- Software Maturity: While Nvidia’s CUDA remains the gold standard, Huawei’s CANN architecture has seen massive improvements in 2025, making it easier for developers to migrate their workloads.
2. Regulatory Stalemate and “Security Fees”
U.S. policy remains a major hurdle. In January 2026, the Trump administration approved the export of H200 chips to China—Nvidia’s second-most powerful AI processor—but with heavy caveats:
- The 25% Tariff: A “security fee” of 25% is applied to these sales, significantly increasing the cost for Chinese buyers.
- Quantity Limits: Strict limits on volume ensure that China cannot build the massive “clusters” needed to surpass U.S. frontier models.
- Customs Delays: As of mid-January, hundreds of millions of dollars worth of H200 chips are reportedly stuck at the Chinese border due to local authorities prioritizing domestic “Buy China” initiatives.
3. Homegrown Alternatives Scale Up
Beyond Huawei, a second tier of “local champions” is filling the remaining 42% of the market:
- Moore Threads: Its Huashan GPUs are now competing directly against Nvidia’s Hopper-class cards (H100/H200).
- Cambricon & MetaX: These firms are expected to capture a combined 15-20% share by providing specialized accelerators for inference.
China AI Chip Market Share Forecast (2026)
| Vendor | 2024 Share | 2026 Share (Projected) |
| Huawei | 15% | 50% |
| AMD | 5% | 12% |
| Cambricon | 3% | 10% |
| Nvidia | 66% | 8% |
| Others (Moore Threads, MetaX) | 11% | 20% |
The Financial Impact on Nvidia
Despite the market share loss, Nvidia’s global revenue continues to hit records (projected at $65 billion for Q4 FY2026).
- Revenue Mix Shift: China’s contribution to Nvidia’s revenue has shrunk from over 25% three years ago to roughly 8-10% today.
- The “Blackwell” Gap: Because Nvidia’s most advanced Blackwell (B200/B300) chips remain banned for export to China, the company is effectively competing with one hand tied behind its back in the region.
Conclusion: A Sovereign AI Future for China
The drop to 8% share marks the end of Nvidia’s “unrestricted” era in China. By late 2026, China is expected to produce enough domestic AI silicon to meet 80% of its own demand. For Nvidia, the strategy has shifted from “market dominance” to “ecosystem preservation”—trying to keep the CUDA software relevant in China through limited chip sales even as the hardware leadership passes to Huawei.
