China's fast-growing artificial intelligence sector may be readying for major purchases of U.S. chips, creating opportunities -- and competition -- for the likes of Nvidia and Advanced Micro Devices.

Nvidia plans to ship as many as 80,000 of its H200 chips to China by mid-February, Reuters reported this week, citing sources familiar with the matter. The company said in response to a request from Barron's that "licensed sales of the H200 to authorized customers in China will have no impact on our ability to supply customers in the United States."

There could be significant upside if U.S. chip companies are able to capitalize on Chinese chip demand and navigate shifting trade tensions that have at times stymied sales, analysts at Raymond James said on Monday.

"Several moving pieces remain, making it difficult to assess the exact outcome," analysts led by Simon Leopold wrote in a note.

In an optimistic scenario, the analysts see revenue upside of $500 million to $800 million for Advanced Micro Devices, which could contribute as much as an additional 20 cents per share to adjusted earnings next year. For Nvidia, China sales upside could be $7 billion to $12.5 billion, with an adjusted earnings boost of as much as 30 cents per share, the analysts said.

However, as will be well familiar for those who have run the gantlet on investing in China, regulatory risks loom large.

"Questions remain regarding whether the Chinese government will allow or discourage its cloud operators from purchasing advanced GPUs, as well as how the U.S. government's export license fee will be accounted for," the Raymond James analysts wrote.

Nvidia will not only need to navigate a complex regulatory landscape but likely competition, too -- from AMD.

AMD's China-compliant artificial intelligence accelerator chips are close to commercial rollout and Alibaba plans to buy as many as 50,000, trade publication MLex reported on Monday, citing sources familiar with the matter.

Alibaba, the Chinese online retail and cloud computing giant, has emerged as one of China's AI leaders this year, helping the stock rally almost 80% in 2025. The company is reportedly buying AMD's MI308 chip -- a version of the more powerful MI300 chip downgraded for export to China.

China promises some nice potential upside for Nvidia -- but, ultimately, the company seems to know that its core business will remain in chip making, where it dominates. The company restructured its cloud team after retreating from competition against Amazon's AWS, the Information reported.

In the end, Raymond James remains bullish on Nvidia and reaffirmed its Strong Buy rating for the company's shares. "We continue to view AI infrastructure as a multi-trillion-dollar opportunity over the next decade, with Nvidia well positioned to sustain industry-leading growth," the analysts wrote.

Nvidia stock was up 3% on Tuesday. AMD shares were flat. Alibaba stock rose 0.2%.