Nvidia secured what was seen as a major win last month when the U.S. government announced it would allow it to resume sales of its made-for-China H20 chip. But it has since become clear that Beijing wont be rolling out the red carpet. Despite the U.S. softening on chip export controls — which Beijing has long opposed — Nvidia is being welcomed back under increased distrust and scrutiny. On Tuesday, Bloomberg reported that China had urged companies against using Nvidia’s H20 chips, or those from Advanced Micro Devices , especially for government and national security use cases, citing sources familiar with the matter. In response to the report, Nvidia said in a statement that the H20 “is not a military product or for government infrastructure,” and that banning the sale of H20 in China would only harm U.S. economic and technology leadership with zero national security benefit. In a separate report , The Information said regulators in China had gone so far as to order major tech companies, including ByteDance, Alibaba and Tencent, to suspend Nvidia chip purchases altogether until the completion of a national security review. “We’re hearing that this is a hard mandate, and that [authorities are actually] stopping additional orders of H20s for some companies,” Qingyuan Lin, a senior analyst covering China semiconductors at Bernstein, told CNBC. The news comes just weeks after Nvidia was summoned by Chinese officials over security concerns regarding potential tracking technology and “backdoors” in their chips. It also throws a wrench into Nvidia’s plans to maintain market share in China, as CEO Jensen Huang tries to navigate his business through increasing tensions and shifting trade policy between the U.S. and China. Beijing’s probe into Nvidia comes after the House and Senate proposed laws that would require semiconductor companies like Nvidia to include security mechanisms and location verification in their advanced artificial intelligence chips. Nvidia has denied that any such “backdoors” that provide remote access or control exist. According to chip industry analysts, however, the actions against Nvidia also highlight that Beijing remains steadfast in chip self-sufficiency campaigns and is likely to resist the Trump administration’s plan to keep American AI hardware dominant in China. “It is signaling to Chinese tech firms that they must continue to support Huawei’s AI development, even if Nvidia’s chips are better,” Chris Miller, author of “Chip War: The Fight for the World’s Most Critical Technology,” told CNBC. Building its domestic supply chain China has long had the desire to build up a self-reliant chip supply chain, and many experts say those efforts have been accelerating since chip export restrictions first took effect in October 2022. While China’s domestic GPU (graphics processing unit) companies remain behind Nvidia in both scale and advancement, they have been beneficiaries of massive state funding and restrictions on Nvidia’s most advanced chips. Reva Goujon, a director at Rhodium Group, told CNBC that Beijing appears to be trying to tackle constraints to the local adoption of Chinese-made chips — based on regulators’ questions about the H20s that were posed to local AI developers. Although that remains a serious challenge, “it’s even more top of mind now that you have U.S. Cabinet officials openly broadcasting a strategy to get China more addicted to U.S. technologies,” she added. When the resumption of H20 exports was first announced in July, a Trump administration official had presented the policy as a trade concession. However, in following weeks, the administration has indicated that the move is also part of a strategy to keep China’s AI built on U.S. technology. Trump is also working on a deal that’s expected to see Washington take a 15% cut of Nvidia’s business in China. Not an all-out ban Still, despite Beijing’s show of resistance to the H20s, experts doubt that Beijing will block their imports in a meaningful way, at least for now. “It’s not likely the Chinese government will maintain a ban. After the investigation is finished, I don’t think it has a strong rationale to actually block the H20s,” said Bernstein’s Lin. However, he added that it’s unclear how long the investigation will last, and that delays to the H20’s return could create more room for local players as AI companies search for alternatives. Companies such as Huawei are designing their own GPUs for the China market. Ray Wang, research director for semiconductors, supply chain and emerging technology at Futurum Group, said recent moves by Beijing are likely meant to send a message that the H20s present a potential security concern, and the government will be monitoring their use very closely. “This could impact some customers’ long-term purchasing decisions,” he added. In the meantime, assuming the H20 chips are allowed back in the market, they are expected to benefit local AI developers as they wait for the domestic industry to continue to advance. “There is meaningful demand for the H20 in China today,” semiconductor research and consulting firm SemiAnalysis said in a note on Tuesday. Huawei, despite an aggressive boost to production, is still unable to meet all of China’s inference demand, they added. While China has been making big strides in chip design, its supply of advanced GPUs remains constrained by existing export controls on the world’s most advanced chipmaking equipment. “Access to US technology can still be valuable when Chinese AI developers and chipmakers are experiencing these growing pains under compute constraints, but Beijing wants to ensure the roadmap is still driving toward self-reliance in the end,” said Rhodium’s Goujon. Meanwhile, there are signs that Washington may take more steps to keep U.S. chips dominant in the Chinese market. On Tuesday, Trump said he was open to extending the chip approvals to companies aside from Nvidia and AMD. He also signaled he would allow Nvidia to sell a less powerful version of its latest Blackwell chip to China.