US sanctions limiting sales of NVIDIA's H20 AI GPUs could have a tighter impact than expected, as a Chinese server company warned customers of a shortage in a client notice. The H20 GPUs came to the forefront of the debate surrounding artificial intelligence in January after China's DeepSeek managed to outperform American peers after using them to train its models. Chinese server firm H3C has warned customers that it is facing tight H20 inventory, which limits the sales of the only high-end NVIDIA GPUs that are sold to China amidst broad US sanctions, which restrict the country's ability to access the most advanced chips.
NVIDIA's H20 Supply To China Could Face Additional Uncertainty, Warns Server Firm
NVIDIA's H20 GPUs made headlines yesterday after a report from the Financial Times cited an old Chinese government notice requiring GPU users to adhere to environmental regulations which could affect the GPUs. NVIDIA's shares are down by 4.3% over the past five days as a result, and are down by 19% year-to-date as the firm fails to escape the pessimism generated during January's DeepSeek selloff.
A Reuters report adds to the gloom as it cites a client notice from Chinese server firm H3C to outline that the H20s are now in short supply in China. These GPUs are the only legal latest chips from NVIDIA that can be sold in China. As a result, their demand is high and the shortage has led H3C to prioritize large customers with sizable orders, according to the report.
The H20 shortages could last beyond April 20th, warns H3C. Some of the reasons that it cites for the delays include production constraints, despite the fact that similar concerns have primarily involved NVIDIA's latest AI GPUs, the Blackwell lineup.
NVIDIA's substantial revenue exposure to China, which could involve as much as 10% of its GPU sales, has roiled the stock this week as investors fret about lower revenue from the country. The firm is already limited from selling its latest AI GPUs to China, and domestic firms in the country are also eager to develop their products to replace NVIDIA.
Media reports have suggested that the Trump administration is considering limiting the sales of H20 GPUs to China as well. To reduce their reliance on NVIDIA, Chinese firms, such as DeepSeek, have tested alternatives to NVIDIA's GPU programming language called CUDA. One alternative is Huawei's CANN language, but reports indicate that it severely lags NVIDIA's products in AI performance.
The Reuters report isn't the first time that sources have shared about an H20 shortage. Just yesterday, a report on Chinese forum MyDrivers claimed that the GPUs are in short supply as firms such as Tencent purchase 'tens of billions of Yuan' worth of products. Whether these purchases are motivated solely by the need for computing power or if potential H20 restrictions are making Chinese firms stockpile them ahead of the new rules being announced is uncertain.
Additionally, whether NVIDIA has also slowed H20 production to avoid excess inventory as it waits for clarity remains unclear. The firm has requested the Trump administration to reconsider the previous administration's rules that limit its unrestricted chip sales to only 18 countries.
