China's Homegrown AI Chip Push Just Got Faster. Is This a Real Threat to Nvidia?

Up until now, Nvidia's (NASDAQ:NVDA) top-tier AI chips – particularly its powerful GPUs – have easily been the best in the world. That's why they've been in such demand all over the world.

Well... all over the world, except for China. U.S. export controls on sensitive technology prohibit the company from selling its top-of-the-line GPUs and other AI chips to Chinese customers.

That created an uneven playing field that's benefited Nvidia's main Chinese rival, Huawei. And an announcement Huawei made today may indicate that the Chinese chipmaker is about to make a serious play for Nvidia's crown.

Here's what was said and what it means for Nvidia investors.

Image source: Nvidia Corporation.

A world of difference

Lately, the U.S. has eyed Chinese technology companies with suspicion and has used export controls to restrict American companies from selling high-end AI chips into the Chinese market. Nvidia had to design a chip, the H20, specifically to comply with U.S. export controls. The H20 was essentially a less-powerful "China-only" variant of its Blackwell chip.

But in June 2025, Nvidia CEO Jensen Huang announced that new, more restrictive AI chip export controls would ban the sale of even the lower-grade H20 to Chinese customers. Nvidia lost $2.5 billion in revenue and took a further $4.5 billion charge due to excess H20 inventory it suddenly found itself unable to ship. It now reports no revenue from China.

At the time, Huang warned that cutting China off from U.S. chips would spur the country to invest more heavily in its own domestic AI chip development efforts. That warning seems prescient in light of today's Huawei announcement.

Image source: Getty Images.

Huawei desperately needs to scale up

According to a Wall Street Journal analysis, Huawei's current Ascend 950 line of chips still doesn't measure up to Nvidia's Blackwell line in terms of raw computing power. But Huawei has been working to change that.

Today in Shanghai, David Wang, one of the rotating chairmen of Huawei, announced a major acceleration in the company's planned chip release schedule.

The Ascend 960DT AI chip, originally set for release in Q4 2027, will instead be released in Q1 2027, nine months ahead of schedule. The companion Ascend 960PR chip, which was also expected in Q4 2027, will now be released in Q3 2027, three months earlier than planned. Wang also announced that the next two Ascend generations – the 970 and 980 – will be released in 2028 and 2029, respectively, with computing power expected to double with each generation.

Of course, Nvidia will also be making more powerful chips by 2029, and it has a big head start. So how much of a problem could this be?

Only a long-term problem

Huawei has made it clear that the Ascend 960 chips will be supplied only to China's domestic market. Another of Huawei's rotating chairmen, Eric Xu, told reporters, "Since we don't have enough capacity to even satisfy the demand in China, we don't have a plan to expand into the international market in a fully fledged way."

Since Nvidia isn't currently selling into the Chinese market, Huawei's advances – even if they're significant – are unlikely to have any impact on its finances in the near term. But Huawei could become a major thorn in Nvidia's side over the long term if it can scale up production significantly and improve its chips' performance faster than Nvidia can.

That's a lot of ifs, however. For now, Nvidia investors can feel secure that Huawei's gains won't become Nvidia's losses anytime soon.

John Bromels has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.