The long-awaited meeting between Donald Trump and Xi Jinping in Beijing has so far yielded few definitive conclusions. Xi warned the US against a potential superpower conflict. However, that conflict is already underway—not as a military conflict, but as an economic one. Today, the biggest fights are being waged over technology, semiconductors, and the future outlook for Taiwan.
Jensen Huang, the head of Nvidia, traveled to Beijing aboard Air Force One with Trump, who personally invited him at the last minute during a layover in Alaska. This in itself shows just how central AI chips have become to modern diplomacy.
The heart of the negotiations was essentially a trade-off. As uncomfortable as it is to admit, the US and China need each other. The US-China trade deal will likely be extended, and we can expect China to partially ease export restrictions on gallium, germanium, and other rare earth elements in exchange for permission to purchase advanced Nvidia H200 chips, which the US Department of Commerce approved on Thursday. However, sales are limited to 750,000 units, and Nvidia’s most powerful chips—the Blackwell and Rubin architectures—remain unavailable to China.
But fostering a dependence on American chips is not in Beijing’s interest. It is therefore likely that China will continue to promote the use of Huawei chips, which are Nvidia’s main competitor in China. Although they are not as powerful and are not compatible with the CUDA architecture, they allow China to achieve self-sufficiency, which could give it an advantage in future negotiations.
China is consolidating its position as a rival global superpower. The situation in the Strait of Hormuz has strengthened China’s position against Trump, who is trying to persuade Xi Jinping to pressure Iran into reopening the strait. If China manages to bolster its domestic chip manufacturing capabilities, it will gain even greater bargaining leverage, which could worsen the outlook for Taiwan—still one of Xi Jinping’s top priorities.
The investment thesis for the AI revolution was never based on Chinese demand, even if it is a welcome bonus. In its current forecasts, Nvidia does not assume any sales to China. For Nvidia, selling chips to China represents revenues in the billions of dollars, which at this point is only a small fraction of its total income. However, China still represents perhaps the greatest risk to the AI business. A potential blockade of Taiwan would have a catastrophic impact on the global semiconductor supply chain, which is highly dependent on the Taiwanese company TSMC, which manufactures the majority of the world’s most advanced chips.
