U.S. approves H200 chip exports to China; NVDA +4.4% as 25% revenue source unlocked

Nvidia received a major geopolitical tailwind this week when the U.S. approved exports of its H200 AI chips to Chinese companies, effectively lifting the export ban that had constrained Nvidia's addressable market for two years. The approval covers 10 Chinese firms and removes prior restrictions on advanced AI chip sales, signaling a potential thaw in U.S.-China tech relations during Trump's summit with Xi Jinping in Beijing. NVDA jumped 4.4% on the headline, as traders immediately repriced the stock to account for the return of a material revenue stream.

Context matters: China historically represented as much as 25% of Nvidia's total revenue before export controls began tightening in 2023-2024. The ability to sell unrestricted H200 and related chips to Chinese data centers, cloud providers and research institutions could unlock billions in revenue that Nvidia had foregone. The timing coincides with Nvidia's May 22 earnings report, where management will likely provide commentary on China re-engagement. Separately, CEO Jensen Huang made headlines for his remarks on energy demand, noting that AI workloads will drive energy consumption up by as much as 1,000x, a narrative that dovetails with emerging concerns about power grid capacity and clean-energy infrastructure spending.

The narrative ties into the broader Fed-pivot trade and mega-cap AI dominance that has driven the S&P 500 and Nasdaq to new highs. Nvidia's exclusion from Chinese markets had been a longstanding concern for bulls who argued that the stock's $5.7 trillion market cap was justified by AI capex booming in the U.S. and allied countries only. The export approval removes a key bear case and re-opens a high-margin market.

Skeptics counter that geopolitical winds remain unpredictable: another escalation could re-impose restrictions, and China's own chip development (including from Huawei and local AI accelerator makers) may have progressed enough to reduce dependency on Nvidia. Some also worry that approving H200 sales while maintaining restrictions on military and defense-grade chips sends a mixed signal and could invite Congressional pushback. The sustainability of China revenues will likely depend on maintaining stable U.S.-China relations.