China Just Put Nvidia on Notice -- And It Could Reshape the AI Chip War

Last week, Chinese internet regulators summoned Nvidia NVDA over its older H20 chips, flagging vague security risks amid rising tensions over US plans to embed location-tracking in AI semiconductors. While no ban was issued, analysts say it's less about H20 and more about messaging. Beijing is signaling that it won't accept hardware backdoors and it's using Nvidia to make that point. Nvidia responded swiftly: No back doors. No spyware. No kill switches. At the same time, US officials confirmed they're exploring software and hardware solutions for chip traceability, though they haven't had direct talks with Nvidia or AMD yet.

Behind the scenes, the stakes are mounting. Washington wants tighter export control enforcement, while Beijing wants leverage and H20 chips offer both sides a bargaining chip. US lawmakers remain split: some want to tighten restrictions, others see room for compromise. Trump's team says a broader deal with China is very close, with rare-earth access already on the table. Still, Chinese state media called the H20 castrated, implying the US reversed course not to appease Beijing, but because China's domestic AI chipmakers are catching up.

Meanwhile, Chinese chip stocks like SMIC and Cambricon popped after the Nvidia news, as investors bet on accelerated local substitution. Analysts believe China could now use Nvidia as a pressure valve to demand more supply assurances, or to speed up its push for tech self-sufficiency. Whether the US presses ahead with the Chip Security Act remains to be seen. But with a fall summit looming, and AI supremacy on the line, this fight is far from over.