Nvidia Positions for China Comeback on Reported Alibaba AI Chip Order
Deal for export-compliant H200 chips hinges on Chinese regulatory approval expected in Q1, testing the waters after US controls decimated sales.
Nvidia Corp. (NVDA) is poised for a significant re-engagement with the Chinese market, as reports emerge that tech giant Alibaba Group Holding is seeking a substantial order for its artificial intelligence chips, with regulatory approval from Beijing potentially arriving as early as this quarter.
The development signals a critical test for Nvidia's redesigned China strategy after stringent US export controls, implemented in late 2023, effectively erased what was once a multi-billion dollar per quarter revenue stream. While Nvidia's stock closed down 2.19% at $185.04 in Thursday's regular trading amid broader market consolidation, this potential breakthrough in China presents a notable tailwind for the $4.6 trillion semiconductor behemoth.
At the heart of the deal is Nvidia's H200 AI accelerator, a less powerful but still capable version of its cutting-edge processors, specifically developed to comply with American export restrictions. Chinese technology firms, including Alibaba and ByteDance, are rushing to acquire these chips to power their large language models and stay competitive in the country's fierce AI race. Sources indicate that both Alibaba and ByteDance have expressed interest in purchasing over 200,000 H200 units each.
Securing these supplies is contingent on a green light from Beijing. The Chinese government is expected to approve the imports in the first quarter of 2026, though with strict conditions. The approvals will reportedly bar the use of these advanced chips by the military, sensitive government agencies, and state-owned enterprises involved in critical infrastructure, aiming to balance domestic technological needs with national security concerns.
The potential order underscores the delicate dance between Washington and Beijing over critical technology. In December 2025, the US government gave conditional approval for Nvidia to sell its H200-series chips to a list of approved Chinese buyers. This marked a partial reversal of a prior freeze, though it came with the stipulation that Nvidia must share 25% of the revenue from these sales with the U.S. government—a clear sign of the continued geopolitical tensions framing the transaction.
For Nvidia, a successful re-entry into China is a strategic imperative. Before the most recent tightening of US controls, the company held an estimated 95% of the Chinese AI chip market. That share plummeted as customers sought alternatives, creating a vacuum that domestic champions like Huawei Technologies sought to fill. According to sources cited by the South China Morning Post, Nvidia is aiming to begin H200 shipments to China by mid-February, contingent on the regulatory approvals.
Despite the immediate market pullback, Wall Street remains overwhelmingly bullish on Nvidia's prospects. The company holds 60 'buy' or 'strong buy' ratings from analysts, with only four analysts recommending a 'hold' or 'sell' position. The consensus price target of $253.54 suggests a potential upside of over 35% from its current price, reflecting confidence in its continued dominance in the broader AI infrastructure market.
The successful execution of large-volume sales to firms like Alibaba would not only provide a direct revenue boost but also serve as a crucial validation of Nvidia's strategy to navigate US restrictions with tailored products. It could establish a new, albeit complex and highly regulated, equilibrium for its business in one of the world's most vital technology markets. However, the path is fraught with challenges, including tightened customs inspections by Chinese authorities and the constant risk of shifting geopolitical winds that could alter the terms of trade with little notice.