China sharply escalated its trade standoff with the United States on Monday, accusing tech giant Nvidia, the most valuable company on the U.S. stock market and a leading supplier of artificial intelligence (AI) chips, of violating anti-monopoly laws. The announcement, made by Chinese regulators, marks a significant development in the ongoing trade and technology dispute between the two global powers.
The statement comes as U.S. and Chinese diplomats hold the fourth round of trade talks in Madrid. Treasury Secretary Scott Bessent, heading the U.S. delegation, described the discussions as progressing well, suggesting cautious optimism despite rising tensions.
However, the Trump administration has been intensifying pressure on China ahead of these talks. On Friday, the U.S. Commerce Department added two Chinese chipmakers, GMC Semiconductor Technology Co. and Jicun Semiconductor Technology, to the Entity List. This designation prevents these companies from purchasing U.S. semiconductor technology, a move widely seen as part of Washington’s strategy to limit China’s access to advanced AI and computing hardware.
A Pattern of Tit-for-Tat Trade Measures
Despite ongoing negotiations, both nations have engaged in tit-for-tat trade measures to gain leverage. The United States has largely restricted exports of AI-related equipment to China, while China has delayed fulfilling commitments to supply rare-earth minerals critical for electronics and defense technology. Analysts say this back-and-forth approach reflects the broader struggle for technological dominance, particularly in AI and semiconductors, which both countries consider essential for national security.
China’s action against Nvidia, however, signals a more aggressive posture than prior responses. It may also serve as a warning to the U.S. that previous agreements allowing Nvidia chip exports to China might not be viewed favorably by Beijing. While China’s technology lags behind the U.S., it is rapidly closing the gap, particularly in AI and high-performance computing.
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The Trump Administration Deal with Nvidia
Last month, former President Trump announced a deal with Nvidia and AMD, another leading chipmaker, allowing them to pay the U.S. government 15% of their semiconductor revenue from China in exchange for licenses to export certain high-performance, but restricted, versions of their chips. The arrangement was designed to maintain U.S. AI leadership while advancing trade negotiations.
Nvidia CEO Jensen Huang, who personally negotiated the agreement with Trump in the Oval Office, has since become a frequent White House visitor. Huang is scheduled to meet Trump during his trip to the United Kingdom this week, highlighting the growing intersection of corporate interests and U.S. foreign policy in shaping AI and technology regulations.
China vs. Nvidia: Uncertainty Looms
While China has accused Nvidia of anti-monopoly violations, it is not yet clear whether the company will face punishment. The Chinese State Administration for Market Regulation announced it would continue its investigation, following an original probe that began in December. Regulators said Nvidia had violated conditions tied to its 2020 acquisition of Israeli chipmaker Mellanox Technologies, though no additional details were provided.
Following the announcement, Nvidia (NVDA) shares fell 1.4% in premarket trading, reflecting investor concerns over potential regulatory repercussions.
The H20 Chip and U.S. Export Controls
Nvidia’s AI strategy has been closely linked to China. Last year, the company released the H20 chip to maintain access to the Chinese market, which accounted for 13% of its 2024 sales. However, U.S. export controls, first implemented under the Biden administration and reinforced in April, blocked sales of certain AI chips to China, including Nvidia’s H20 and AMD’s MI308 chips.
The unprecedented deal negotiated under Trump now allows these companies to obtain export licenses to resume sales of these chips to China. Despite this, it remains uncertain whether China will accept them. Social media accounts linked to Chinese state media have expressed security concerns over the H20 chips, reflecting the broader tension between economic opportunity and national security.
China’s Potential Black-Market Access
Analysts also note that China may already be obtaining these chips through unofficial channels. The H20 chips are believed to have played a role in the development of DeepSeek, an advanced Chinese AI model that surprised Silicon Valley earlier this year. DeepSeek’s capabilities suggest that China may be further ahead in AI development than previously understood, raising concerns about the global AI technology race.
Implications for U.S.-China Trade Relations
The Nvidia case underscores the fragile state of U.S.-China trade relations, particularly in the high-tech sector. Both nations view AI and semiconductor technology as critical to national security, making regulatory actions highly sensitive. China’s move may serve as leverage in ongoing trade talks, signaling that Beijing will aggressively defend its interests in technology while also testing the Trump administration’s agreements.
Meanwhile, the U.S. continues to seek ways to maintain its technological edge. The combination of export controls, revenue-sharing agreements, and corporate engagement with the government reflects a strategy designed to balance commercial interests with national security priorities.
Frequently Asked Questions
Why is China investigating Nvidia?
China’s regulators claim Nvidia violated anti-monopoly laws and the terms of its 2020 acquisition of Mellanox Technologies.
Will Nvidia face penalties in China?
It is unclear. The Chinese State Administration for Market Regulation has launched a further investigation but has not announced any penalties.
How does this affect Nvidia’s business?
The probe may impact Nvidia’s access to the Chinese market, which accounted for 13% of its 2024 sales, and could affect stock performance.
What is the U.S. doing about chip exports to China?
The U.S. has restricted AI chip exports, including Nvidia’s H20 and AMD’s MI308 chips, though recent Trump-era deals allow limited exports under licenses.
Why are AI chips important in U.S.-China trade tensions?
AI chips are crucial for technological and national security, making them central to the trade dispute between the U.S. and China.
Could China access Nvidia chips outside official channels?
Yes. Analysts suggest China may already obtain H20 chips through black-market channels, contributing to advanced AI projects like DeepSeek.
What does this mean for U.S.-China trade talks?
The investigation signals rising tensions and may influence ongoing negotiations, highlighting the strategic importance of AI and semiconductors in trade discussions.
Conclusion
China’s antitrust probe into Nvidia underscores the growing complexity of U.S.-China trade relations, especially in the high-stakes AI and semiconductor sectors. The investigation highlights how corporate decisions, government regulations, and international diplomacy intersect in the global technology race. As both nations vie for AI supremacy, the outcome will shape not only trade policies but also the future of innovation, market access, and national security in the rapidly evolving tech landscape.
