While Nvidia could get shut out of China, it has a big opportunity to grow in other international markets over time

Nvidia CEO Jensen Huang said not being able to sell to China would be a “tremendous loss.”

As Nvidia Corp. faces more restrictions on sales to China, the company fears missing out on the country’s growing artificial-intelligence market. But one analyst says the chip maker will be fine in the long run because it has ample opportunity to grow sales in other international markets.

Nvidia Chief Executive Jensen Huang said in a Tuesday CNBC appearance thatnot being able to sell to China, where he expects the AI market to be worth $50 billion in the next few years, would be a “tremendous loss.”

“We just have to stay agile,” Huang said, after the company’s H20 chips — which were specifically designed for the Chinese market to comply with U.S. export controls — were banned for sale in the country by the Trump administration in April. “Whatever the policies are of the government, whatever is in the best interest of our country, we’ll support,” he added.

But Huang’s mindset around China is “not long-term enough,” Richard Windsor, founder of research firm Radio Free Mobile, said in a note on Thursday. China will remain years behind the U.S. when it comes to chip technology, Windsor said, adding that he doesn’t expect the country to catch up and become a legitimate supplier to other countries.

So while Nvidia and other Western chip makers will lose sales to China, they will gain more with growing market share in other countries, Windsor said — with the caveat that they will have to wait longer for the returns. 

“Even though he is famed for thinking way ahead of everyone else, this time he is too short-term focused, as what U.S. and Western companies lose in China, I think they will get back elsewhere in time,” Windsor said. 

Under increasing limitations on using advanced chip-making equipment developed by Western countries, Windsor said China has been driven to spend billions of dollars on building its own semiconductor technology.

“As a result, I think that China is absolutely determined that it will never suffer another dependency, and so, regardless of whether Nvidia is restricted or not, I suspect that China is looking to stop buying [data-center] chips from Nvidia, AMD, and everyone else that is not Chinese,” Windsor said.

The country currently has at least 12 chip-fabrication plants, known as fabs, for 7-nanometer chips under construction, Windsor said. And homegrown companies such as Huawei Technologies Co. and Semiconductor Manufacturing International Corp. are innovating off of chip-patterning techniques from Taiwan Semiconductor Manufacturing Co. and Intel Corp., he added.

But while the Chinese government is currently subsidizing the cost of producing 7-nanometer chips in the name of national security, that will eventually become unaffordable, Windsor said, especially against the backdrop of a “[lackluster] Chinese economy, demographic issues, the huge debt pile and the dreadful state of the Chinese real estate market.”

And China still faces a “much more complicated manufacturing procedure and lower yields” despite being able to make 7-nanometer chips without the extreme ultraviolet lithography technology it is cut off from, Windsor said. This means Chinese-made chips made with the 4-nanometer process and beyond will be more expensive than those made by Nvidia and Advanced Micro Devices Inc.

Therefore, countries other than the U.S. and China looking to buy chips in the long term will have an “easier choice,” since Chinese-made chips will be expensive — and even less enticing because of existing red tape that comes with working with the Chinese government.

“I think it will be a decade or more before China manages to get EUV working properly, and so I don’t think that this competitive dynamic is going to reverse itself anytime soon, if ever,” Windsor wrote. “Hence, the Western variant will be cheaper as it uses more advanced silicon, making it a better choice for all 3rd party countries.”

Shares of Nvidia gained 3% Wednesday after pushing higher late in the session on a report saying that the Trump administration is not planning to implement the Biden administration’s AI-diffusion rules controlling chip shipments to the rest of the world. President Donald Trump is developing his own restrictions on semiconductors, Bloomberg reported, although he reportedly has not made a final decision on the matter. The stock rose 0.3% on Thursday.

“We welcome the Administration’s leadership and new direction on AI policy,” Nvidia said in a statement shared on X after the Commerce Department confirmed that it was making its own rules. “With the AI Diffusion Rule revoked, America will have a once-in-a-generation opportunity to lead the next industrial revolution and create high-paying U.S. jobs, build new U.S.-supplied infrastructure, and alleviate the trade deficit.”