Nvidia (NASDAQ:NVDA) shares turned lower following a modest beat in second-quarter results, as China pushes to triple its AI chip production in pursuit of tech self-reliance. This development highlights the complex geopolitical landscape the chipmaker faces, according to Chris Miller, Tufts Fletcher School associate professor and author of “Chip War,” in an interview with CNBC.
“The challenge Nvidia (NASDAQ:NVDA) faces is that they’re squeezed on the one hand between Donald Trump and on the other hand Xi Jinping, and they’ve got to navigate demands of both of those governments,” Miller explained.
While the U.S. government has signaled willingness to let Nvidia (NVDA) sell to China, Chinese authorities are now investigating Nvidia’s (NVDA) H20 chips for alleged security issues, creating a dual challenge for the company.
The US government is attempting to strike a delicate balance in its approach to China’s AI chip access. Washington is weighing how to enable Nvidia (NVDA) to capture revenue while simultaneously restraining China’s AI companies like DeepSeek, ByteDance (BDNCE), and Alibaba (BABA), which have “benefited immensely” from access to high-end U.S. chips.
Miller noted there’s “a really active debate right now in Washington as to what the right balance is to strike.”
The proposed revenue-sharing concept between Nvidia (NVDA) and the U.S. government introduces additional complications. “It does muddy the waters in terms of whether U.S. regulations are about security or are about economics and revenue generation,” Miller said.
“For tech firms, it’s a dangerous road to go down because it ties them more closely to the U.S. government at a time when they’re trying to argue to their customers that they’re independent actors.”
China’s long-term strategy remains focused on semiconductor self-sufficiency, regardless of current dependencies. “The Chinese government has never wanted foreign chips in their market. The challenge is that they can’t produce enough domestically to fill that gap,” Miller pointed out.
He added that once domestic production can meet demand, “the Chinese government will have no concern whatsoever about locking out Western tech firms as they’ve done in every other market.”