Nvidia is losing its dominant position in China’s AI chip market as Huawei and other domestic manufacturers expand their presence, highlighting the growing impact of U.S. export controls on the global semiconductor industry. Data from market research firm IDC shows that Nvidia’s share of China’s data-center AI chip market declined to 34% in the first half of 2026, narrowing its lead over Huawei and intensifying competition in a strategically important market.

Export Restrictions Weaken Nvidia’s Position

Nvidia shipped 678,000 AI accelerators to China between January and June 2026, a 44% decline from the same period a year earlier. Its market share fell as U.S. restrictions limited the range of advanced processors the company could sell in the country. Washington has sought to restrict China’s access to powerful computing technology, citing national security concerns, while Beijing has encouraged domestic alternatives and introduced approval requirements for companies seeking to import eligible Nvidia chips.

The restrictions have created a difficult trade-off for Nvidia. The company remains a major force in the global AI computing industry, but limited access to Chinese customers constrains its ability to participate fully in a market that CEO Jensen Huang has described as worth approximately $50 billion. Nvidia has criticized U.S. export controls, arguing that they risk transferring business opportunities to Chinese competitors rather than preventing China from developing its own AI capabilities.

Huawei and Domestic Chipmakers Gain Market Share

Huawei shipped 572,000 AI accelerators in China during the first half of 2026, up from more than 300,000 a year earlier, capturing 28% of the market. Although Nvidia retained the leading position, the gap between the two companies narrowed considerably.

Other Chinese manufacturers also expanded their presence. Alibaba’s chip-design unit T-Head accounted for 7% of the market, followed by Cambricon at 5%, Baidu’s Kunlunxin at 4% and Hygon at 3%. Nine of the 11 Chinese chipmakers tracked by IDC increased shipments year over year, indicating that the shift extends beyond a single competitor.

The broader market is also changing in terms of hardware demand. Total shipments of AI accelerators reached 2.008 million units in the first half. Shipments of GPUs, widely used to train AI models, fell 26% to 991,000 units. Meanwhile, shipments of other AI accelerators rose nearly 80% to 1.016 million, overtaking GPUs by volume. These processors are often designed for specific workloads, including running already-trained AI models.

Competition Shifts From Individual Chips to Computing Systems

Huawei, T-Head, Kunlunxin and Cambricon collectively accounted for 95% of China’s non-GPU AI accelerator segment. Government agencies, internet companies and telecommunications providers are among the users adopting these alternatives. The trend suggests that purchasing decisions increasingly depend on the performance of complete computing systems, including how efficiently processors operate together in large clusters, rather than on individual chip specifications alone.

IDC expects China’s total AI accelerator shipments to grow 19% in 2026, even as GPU shipments decline 9%. The forecast points to continued demand for AI computing despite restrictions on access to advanced foreign processors.

Investors will be watching whether Nvidia can preserve its position through the products permitted under U.S. export rules, while Huawei and other domestic suppliers work to improve performance, production capacity and software compatibility. The pace of adoption of Chinese chips, the evolution of export policy and the economics of AI infrastructure will help determine how much of China’s expanding AI market remains accessible to Nvidia.