Nvidia (NVDA) Faces Setback as DeepSeek Opts for Huawei Over American Chips

Key Takeaways

• DeepSeek’s V4 AI model operates predominantly on Huawei’s Ascend processors rather than Nvidia hardware.
• Zero H200 chips have been delivered to Chinese firms despite receiving US regulatory clearance.
• Delivery obstacles arise from unresolved US-China disputes regarding transaction conditions.
• The Chinese AI infrastructure sector is valued at $50 billion with 50% year-over-year expansion.
• NVDA shares declined 1.41%, though premarket Friday trading showed a 0.8% uptick.

Nvidia confronted fresh obstacles in its Chinese market strategy this week when DeepSeek unveiled its V4 model — built predominantly on Huawei’s semiconductor technology rather than Nvidia’s offerings.

NVIDIA Corporation, NVDA

DeepSeek introduced preview iterations of its V4 architecture on Friday. Industry observers paid close attention following the previous version’s market impact last year, which demonstrated sophisticated performance while requiring surprisingly modest training expenditures.

Huawei seized the opportunity swiftly. The Chinese technology powerhouse announced via WeChat that its complete Ascend AI processor portfolio now accommodates DeepSeek V4 models. While DeepSeek acknowledged testing one of V4’s crucial optimization methods on both Nvidia GPUs and Huawei processors — the dominant hardware platform clearly favors domestic solutions.

This development represents a significant challenge for Nvidia, which faces exclusion from China’s premium AI chip sector through American export controls.

H200 Shipments Remain at Standstill

CEO Jensen Huang announced last month that Nvidia had resumed production of its H200 processors targeting potential Chinese markets, revealing that several customers had submitted orders. However, Reuters disclosed this week that no H200 units have actually been delivered to any Chinese purchaser.

While the Trump administration granted approval for H200 transactions with China, implementation has stalled. Conflicts between Washington and Beijing regarding specific transaction parameters have prevented deliveries, according to Reuters’ insider sources.

Chinese purchasers also face difficulties obtaining authorization from their own governmental authorities to complete acquisitions.

The Financial Impact

The financial implications are substantial. Huang has characterized China’s AI infrastructure marketplace as worth $50 billion annually with 50% yearly growth.

KeyBanc analyst John Vinh projects that under unrestricted sales conditions, Chinese enterprises would purchase approximately 1.5 million H200 processors this year. Such volume would generate roughly $30 billion in Nvidia revenue.

Currently, actual revenue from these sales remains at zero.

Nvidia’s stock retreated 1.41% during regular trading, although premarket activity Friday showed a 0.8% increase before Reuters published details about the frozen H200 transactions.

DeepSeek’s V4 introduction intensifies competitive pressure. Should Chinese AI engineers continue developing on Huawei’s Ascend ecosystem, Nvidia’s market opportunity could shrink further — regardless of whether trade and regulatory barriers eventually resolve.

The H200 processors are manufactured and inventory-ready. Their eventual delivery to Chinese clients hinges on negotiations that currently show little progress.

Through Friday, Nvidia has recorded zero H200 transactions with Chinese purchasers, with Reuters documenting shipment postponements stemming from ongoing disputes between American and Chinese authorities over sale stipulations.

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