US Approves H200 Chip Exports to China, NVDA Faces Upside Surprise

In a dramatic reversal of US-China tech containment policy, the Biden and Trump administrations have approved the export of Nvidia's H200 chips to a subset of Chinese companies, marking a stunning turnaround from years of strict AI chip embargoes. This move potentially restores a quarter of Nvidia's annual revenue stream that was cut off by restrictions, creating an unexpected catalyst just days before the chipmaker's earnings call next week.

The approval came to light amid Trump's two-day Beijing summit with Xi Jinping, where trade and technology were central topics. Initial reaction was bullish: NVDA surged in early trading as analysts revised upward their revenue forecasts, eliminating the so-called "China overhang" that had weighed on the stock since 2023. The move also lifted the broader semiconductor complex, with AMD and Broadcom (AVGO) similarly pressured higher as traders rotated into chip plays previously seen as geopolitically constrained.

The geopolitical implications are substantial. The approval suggests a pragmatic rapprochement on technology exports, though the scope remains limited to 10 companies and specific product lines. Energy implications are also important: Nvidia CEO Jensen Huang noted that AI workloads will drive electricity demand up 1000x, creating tailwinds for power infrastructure and utilities serving data centers. For semiconductors, the China reopening removes a major uncertainty overhang that had kept valuations depressed relative to growth. With earnings season underway, the narrative has shifted from "China supply is cut off" to "China supply can be negotiated."

Sceptics caution that the approval remains narrow and could face Congressional pushback. Some observers worry that the optics of exporting advanced chips to China during geopolitical tensions could trigger regulatory or political retaliation. Additionally, markets may have already priced in much of this upside given the recent rally in chip stocks; any disappointment in forward guidanceCompany-issued forecasts of future financial performance. could trigger sharp pullbacks.