The much-anticipated China agreement emerged as expected over 12 months, yet it fell short of being optimal due to consultant obstructions. The exclusion of NVIDIA’s issue from the U.S.-China discussions did not favor risk markets, including cryptocurrencies. The reason for this oversight was soon unveiled.
China and NVIDIA
NVIDIA made substantial arrangements with Trump to remove export barriers exclusively with China. Many companies followed suit, committing to investments worth hundreds of billions of dollars. However, the Trump administration intensified its stance, rendering these agreements pointless. Trump granted export permits to China, on the condition that NVIDIA covers the costs, only to be shocked by China’s refusal to accept the chips.
This resulted in wasted days, negotiations, and discussions. It was anticipated that recent U.S.-China negotiation talks would touch upon the sale of NVIDIA chips to China. However, this issue never arose, adversely affecting NVIDIA and the risk markets.
Trump’s top advisers firmly believed that providing NVIDIA chips to China posed a threat to national security. Due to the unanimous opposition from the advisors, the topic was deliberately omitted from discussions with Xi. This outcome represented a significant victory against Huang, who had long campaigned for a contrary decision.
Nevertheless, abstaining from selling to the world’s second-largest economy risks the U.S. losing a permanent market opportunity to China. China, facing this necessity, could potentially develop superior alternatives much like it has in other areas.
Cryptocurrencies
NVIDIA loses out on billions in export revenues, the U.S. sacrifices invaluable tax income, and the AI race faces deceleration risks. NVIDIA’s growth indirectly impacts cryptocurrencies, with any halt in growth negatively affecting the U.S. stock markets, cryptocurrency markets, and other sectors.
What is the outcome? The adamant stance from Trump’s advisors likely continues to impede the export of a reduced-power 30% Blackwell chip to China (with 15% revenue projected to the U.S.). In retaliation to sanctions, China had already encouraged companies to cease using NVIDIA products. Consequently, NVIDIA finds itself alienated from the Chinese market, a situation set to persist barring any unforeseen surprises.
This presents revenue declines, risks to AI growth, and the probability of China developing its own NVIDIA. Does winning the AI race matter? Recently, NVIDIA’s CEO remarked, “it doesn’t matter who wins.” The China Special Committee criticized this as “dangerously naïve,” likening it to the Cold War.
“It’s akin to arguing the Soviets surpassing the U.S. in nuclear arms is inconsequential.”
