Nvidia’s China Chip Tailwind Might Be Discounted

For some reason or another, shares of Nvidia (NASDAQ:NVDA | NVDA Price Prediction) just can’t seem to get going. For a Mag Seven stock, though, Nvidia is doing just fine. But for a semiconductor name, it’s been tough to hang onto the shares while watching the rest of the industry take off by another triple-digit percentage points this year. Indeed, perhaps the boom going on in the AI chip scene is more to do with a “correction” to the upside as investors view the names as not cyclical, but structural growers this time around.

With the profits flowing in quickly across the “picks and shovels” plays, perhaps Nvidia is the last bargain standing within the wild world of semiconductor names. The $4.8 trillion GPU titan is poised to keep selling its latest and greatest as firms across the board look to scale up or run the risk of conceding ground to a rival in a race where only the gold medal leads to that massive payday, at least when it comes to high-end AI at the absolute frontier.

Picks and shovels are continuing to win big in the great AI buildout

Of course, scaling up and procuring as many GPUs as possible for those next-generation data centers isn’t enough. For AI labs at the absolute cutting edge, more research and a move beyond large language models (LLMs) towards world models and Mixture-of-Experts (MoE) architectures could be the right path towards some form of superintelligence or artificial general intelligence (AGI).

In any case, Anthropic’s Claude Mythos model has arguably been the big story of the year for AI. It worsened the so-called SaaS-pocalypse, which hasn’t yet fully healed. More recently, China supposedly matched the powerful model when it comes to cybersecurity applications.

That lead that Anthropic had certainly did not last long. Whether or not this represents another DeepSeek moment, though, remains the trillion-dollar question. Any way you look at it, Zhipu’s GLM-5.2 model is profoundly powerful. And what’s most striking is that it’s far cheaper to run than the likes of a Claude Mythos.

China is not far behind in the AI race

Perhaps the great Jensen Huang, who previously noted that China is just “nanoseconds” behind the AI race, was 100% right. With China now possessing a powerful model that can hunt bugs just as well as Mythos, questions linger as to what the AI race now looks like. Perhaps Jensen Huang was also right in that America should look to control the hardware stack. And, with that, perhaps it’s time to think about the bull case that sees Nvidia sell more chips (perhaps beyond the H200) into the Chinese market.

With Huawei gaining traction on AI chips, it’s clear that America may very well be losing its grip on the Chinese market. Add Huawei’s CUDA-like ecosystem into the equation, and it might be tough to gain ground in the market, as China’s silicon floors it. For now, it feels like China’s sales of Nvidia chips aren’t priced in the slightest.

Maybe working together is the way to go in order to mitigate the potential dangers of AI at the frontier. Who knows? Perhaps some sort of “grand bargain” sees China sending DRAM over, while buying more Nvidia GPUs could greatly benefit both sides, taking out pain in the AI buildout while mitigating risks associated with the technology itself.

While Huawei is firing on all cylinders now, my bet is that Nvidia will remain ahead just about every step of the way. That’s the big bargaining chip America has, and it might just be played if a deal can be ironed out. Perhaps chipping away at Huawei’s monopoly is the move, while keeping China dependent on American technology (made pricier with tariffs), that’s intentionally a step behind the latest and greatest.

I don’t know about you, but I think Nvidia is right again about the benefits of selling Nvidia technology into China. Whether China sales ever end up moving the needle for Nvidia, though, remains the big question.

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