Nvidia reopens China channel, but H200 flows remain policy-constrained

Nvidia is restarting production of its H200 artificial intelligence processors for Chinese customers after months of uncertainty, with CEO Jensen Huang confirming that purchase orders are in place and manufacturing is ramping back up.

The move points to a partial reopening of a key market under tighter US oversight, even as investors question how sustainable the broader AI rally remains.

Orders secured, production restarts

At its GTC event, Nvidia confirmed it has received purchase orders for H200 chips from China and is moving to resume manufacturing.

The company’s supply chain is now ramping up to support renewed demand.

This marks a shift from late February, when Nvidia indicated it had not yet generated revenue from China under the current regulatory environment.

Sales tied to compliance constraints

The reopening of the China channel comes with significant conditions.

Shipments are expected to undergo US inspections, face a 25% duty, and may be subject to caps on the number of chips sold per customer.

Chinese regulators have also granted licenses to major technology firms, including ByteDance, Alibaba, and Tencent, to collectively purchase large volumes of H200 units, suggesting substantial demand if compliance requirements are met.

Software flywheel strengthens demand

At the same time, Nvidia is seeing strong traction on its AI software stack. Its open-source ecosystem is gaining rapid adoption, with enterprise offerings building on top of it.

Chinese customers purchasing H200 chips are also developing on Nvidia’s software platforms, reinforcing a feedback loop in which software adoption drives hardware demand, while also concentrating geopolitical and regulatory exposure within the same ecosystem.

Shares of Chinese AI developers moved higher on the news, reflecting optimism around renewed access to Nvidia’s hardware.

New growth drivers and lingering doubts

Nvidia is also expanding its compute roadmap, with next-generation systems entering production and expected to handle a meaningful share of workloads.

Additional revenue streams from recent strategic moves could further boost growth, though some of these contributions are not yet reflected in long-term projections.

Despite this momentum, parts of the market remain cautious.

Prediction markets suggest a non-trivial probability of an AI sector downturn by the end of 2026, alongside continued expectations that Nvidia will retain its leadership position.

In the path ahead, key indicators include the pace of H200 production, the impact of inspections and tariffs on delivery timelines, and whether licensed Chinese buyers convert approvals into sustained, large-scale orders.

For now, the signal is clear: demand from China is re-emerging, Nvidia’s supply chain is ramping, and a new compliance-driven framework is taking shape.

Whether this momentum holds will depend on policy stability, execution, and a market that is increasingly pricing both upside potential and downside risk.

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