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Although the US has backed off from its more stringent export controls on NVIDIA's China-specific H20 GPUs, allegedly as part of a broader give-and-take to resolve reciprocal Chinese export restrictions on rare earth magnets, this de-escalation can't fulfill China's ravenous appetite for AI GPUs, not by a long shot.
For the benefit of those who might not be aware, the Trump administration had imposed stringent export licensing requirements on NVIDIA's China-focused H20 chips back in April 2025, prompting the GPU manufacturer to write off its inventory worth billions of dollars.
However, after weeks of public exhortations by its CEO Jensen Huang, where he emphatically argued in favor of re-deploying the American technology stack in China, NVIDIA published a blog post a few days back, announcing the imminent filing of an application with the US government to resume the sale of its China-specific H20 GPUs.
NVIDIA notably claimed that it has received assurances from US officials that it will receive the requisite authorizations promptly, allowing it to resume H20 shipments to China.
This brings us to the crux of the matter. Jefferies has now estimated that NVIDIA currently has between 600,000 and 900,000 units of its H20 GPU in inventory, while the demand from China for these AI-critical chips currently persists at around 1.8 million units.
Jefferies also believes that NVIDIA shipped around 300,000 units of the H20 GPU to China in the first quarter of 2025 - a shipment volume that was largely in line with NVIDIA's delivery cadence in the pre-ban period.
Despite growing friction and bottlenecks, Jefferies analysts believe that Chinese firms continue to prefer NVIDIA's offerings due to the CUDA ecosystem, superior cluster performance of those chips, and the limited availability of comparable domestic offerings, including Huawei's 910C GPUs.
Of course, the yawning demand-supply gap for H20 GPUs in China is likely to be filled by NVIDIA's upcoming B30 chips, which will start getting shipped to China in the fourth quarter of 2025, albeit with "reduced memory specs to comply with a likely new criterion for AI chip export control."
As such, Jefferies has now raised its China-specific AI CapEx estimate for the ongoing year by 40 percent to $108 billion, while hiking its CapEX estimate for 2025-2030 by 28 percent to $806 billion.
Meanwhile, the US is currently facing its own supply shortfall for domestically manufactured chips, with the US Treasury Secretary Scott Bessent recently declaring that TSMC Arizona handles just 7 percent of the overall demand from US companies, with "overregulation" continuing to act as a critical dampener for ramping up the domestic manufacturing of chips.
