Customers around the world have been rushing to get in on Nvidia's (NVDA 1.59%) artificial intelligence (AI) chips. They are looking for the most powerful tools to develop their programs -- and that leads them to this tech player. Nvidia got in on AI in its earliest days, designing its graphics processing units (GPUs) to suit this market. This gave Nvidia a first-to-market advantage, something it's held onto thanks to its quality products and commitment to innovation.
All of this has led to spectacular earnings growth, which has continued quarter after quarter and led to record levels of revenue -- revenue soared to more than $215 billion in the latest full year. But one thing got in the way of even more revenue growth last year, and the problem has been ongoing: Nvidia has been absent from China. The U.S. blocked sales of high-powered AI chips to the country last year, and though it recently gave Nvidia the nod to sell certain chips there, exports haven't yet begun.
Nvidia just delivered an update on its future in this major AI market. Here's what you need to know.
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China's AI chip market
First, though, a quick summary of the Nvidia story prior to last year's halt to China sales. Nvidia has generated most of its sales in the U.S. in recent years, but China has still been a significant market. For example, in the 2025 fiscal year, 13% of the company's revenue came from China -- and that's with initial export controls in place.
The U.S. government, citing security concerns, halted exports of advanced AI chips to China starting in 2022, so Nvidia designed a lower-power chip, the H20, specifically for that market. Meanwhile, Nvidia sold its more advanced H200 and later the Blackwell and Blackwell Ultra systems in other markets, including the U.S.
This balance allowed Nvidia to maintain a position in the Chinese AI market -- Nvidia chief Jensen Huang recently said that the market may be valued at $50 billion a year, according to CNBC.
But early last year, the U.S. put a halt to sales, and this resulted in a billion-dollar charge for Nvidia in the first quarter as it was left with H20 inventory that it couldn't ship to China. As the year progressed, Huang met with President Donald Trump and spoke numerous times publicly about the importance of resuming sales to China. And late in the year, the U.S. gave Nvidia the go-ahead, this time to sell H200 chips there. In exchange, Nvidia would offer 25% of sales there to the U.S.
NASDAQ: NVDA
Key Data Points
H200 products for China
Since that moment, investors have been closely watching the situation for signs of a return to the Chinese market. During Nvidia's earnings call last week, the company said the U.S. government approved "small amounts" of H200 products for customers in China, but this hasn't yet resulted in actual sales. Nvidia doesn't know whether these products will be allowed into China.
"Our competitors in China, bolstered by recent IPOs, are making progress and have the potential to disrupt the structure of the global AI industry over the long term," Nvidia finance chief Colette Kress said. She also said Nvidia continues to communicate with both the U.S. and Chinese governments regarding the situation.
Now the question is: Should you be worried about Nvidia's future in China? It's true that this represents an element of uncertainty -- and it concerns a market that could be a big one for Nvidia as this AI story progresses.
But it's also important to remember that, even with the absence of China, Nvidia's earnings have been soaring. So, while China would offer a significant boost, it's not absolutely necessary for growth. In the recent quarter, for example, Nvidia's revenue surged 73% to $68 billion, and net income climbed 94% to $42 billion.
Meanwhile, there's reason to be optimistic about an eventual return to the Chinese market, with the U.S. now supporting the idea.
All of this means that, while the uncertainty regarding Nvidia's situation in China remains a headwind, it doesn't tarnish the company's bright long-term story.
