China Shifts Strategy Once More: What’s the Best Way to Approach Nvidia Shares During the Ongoing H200 Controversy?

Global Policy Shifts and the Nvidia Dilemma

The ongoing rivalry between the United States and China, two of the world's economic giants, is marked by frequent and unpredictable changes in policy. This competition is especially evident in the technology sector, where both nations are eager to outmaneuver each other. At the heart of this contest is Nvidia (NVDA), a company based in Santa Clara, California. Once known primarily for its chips, Nvidia has now become a significant player in the diplomatic landscape between these two superpowers.

Nvidia's Strategic Importance in AI

Nvidia's chips are recognized as the most advanced globally, serving as the backbone of artificial intelligence development worldwide. Aware of their reliance on Nvidia, China has been striving to cultivate its own semiconductor industry to lessen its dependence on American technology. Despite some progress, Chinese-made chips still lag behind Nvidia’s offerings, even those from previous generations.

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Export Controls and Policy Reversals

Last year, the United States implemented the AI Diffusion Rule, restricting the export of Nvidia’s H200 chips to China in an effort to limit Chinese access to cutting-edge American technology. By mid-2025, Nvidia reported zero sales of AI chips to China—a market that previously generated nearly $20 billion in annual revenue for the company.

In October 2025, Nvidia CEO Jensen Huang stated, “At the moment, we are 100% out of China,” noting a dramatic drop from a 95% market share to none at all.

However, in December 2025, a new policy was introduced by President Donald Trump, allowing Nvidia to resume H200 chip sales to China under certain conditions, such as meeting security requirements and paying a 25% surcharge on related revenue. While Nvidia’s stock responded positively, doubts persisted, especially as further regulations were imposed within a month, complicating the process for selling H200 chips to China.

Recently, the U.S. Bureau of Industry and Security formalized licensing requirements for exporting advanced chips like the H200 to China. These stipulations include case-by-case export approvals, strict licensing, ensuring hardware does not threaten U.S. interests, and limiting Chinese shipments to no more than half of U.S. domestic sales of the same products. The 25% surcharge remains in effect.

China's Response and Ongoing Uncertainty

China, confident in its own chip development, has reportedly become more cautious about importing Nvidia’s H200 chips. Authorities are said to be drafting rules to limit the number of H200 chips allowed into the country and to specify which companies can import them. Amid this uncertainty, Jensen Huang emphasized that only confirmed purchase orders would indicate genuine demand from China.

In essence, Nvidia should only consider the Chinese market active once it receives actual purchase commitments, at which point it can resume reporting sales from the region.

Nvidia's Financial Strength Amid Geopolitical Tensions

Despite the lack of AI chip sales to China since mid-2024, Nvidia’s financial performance has remained robust, consistently exceeding market expectations.

Over the past decade, Nvidia’s revenue and earnings have grown at compound annual rates of 44.06% and 66.66%, respectively. The third quarter of 2025 reinforced this momentum, with the company surpassing both revenue and earnings forecasts and achieving year-over-year growth rates above 50%.

For Q3 2025, Nvidia reported revenue of $57.1 billion, a 62% increase from the previous year. Earnings per share climbed 60% to $1.30, beating the consensus estimate of $1.26. The data center division, Nvidia’s primary growth driver, saw a 66% jump to $51.2 billion.

Cash flow remained strong, with operating cash flow rising to $23.8 billion from $17.6 billion a year earlier, and free cash flow surging 65% to $22.1 billion. The company ended the quarter with $60.6 billion in cash, less than $1 billion in short-term debt, and $7.5 billion in long-term debt, resulting in cash reserves more than eight times its long-term obligations.

Guidance for the December quarter projects revenue near $65 billion, representing a 65.4% year-over-year increase.

Overall, Nvidia’s investment case remains compelling. The company’s market capitalization stands at $4.45 trillion, and its stock has climbed 40% over the past year, showing resilience despite challenges in China.

Nvidia’s Market Leadership and Global Reach

With a dominant share exceeding 90% in the GPU market, Nvidia’s leadership is built not only on its Blackwell and upcoming Rubin chips but also on its comprehensive ecosystem, including CUDA software and NVLink technology. This integrated approach makes Nvidia the preferred supplier for a diverse clientele, from major data center operators to top automotive brands.

Additionally, Nvidia’s exposure to risks from China is lessened by the rapid adoption of AI by sovereign nations. Countries like Saudi Arabia and the UAE have become major customers, investing over $100 billion in long-term projects aimed at building national digital infrastructure and diversifying their economies.

As more governments worldwide incorporate Nvidia’s technology into their AI strategies, the company enjoys a stable demand base, providing a buffer against the cyclical fluctuations that often impact tech firms with concentrated geographic exposure.

Analyst Ratings for Nvidia (NVDA)

Analysts have given Nvidia stock a consensus rating of “Strong Buy,” with an average price target of $255.07—suggesting a potential upside of about 36% from current prices. Of the 49 analysts covering the stock, 43 recommend a “Strong Buy,” three suggest a “Moderate Buy,” two rate it as a “Hold,” and one as a “Strong Sell.”