China Semiconductor Stocks Rally After NVIDIA Orders Halt To H20 Chip Production

NVIDIA ordered some component suppliers to suspend production of its H20 AI chip, according to report the information. This came after U.S. Commerce Secretary Howard Lutnick’s offensive remarks on CNBC, increasing the geopolitical tensions. The market turns more positive on the domestic AI semiconductor supply chain, sending key names like Cambricon, Hygon and SMIC higher.

China’s domestic semiconductor supply chain has undergone significant expansion and transformation driven by localization demand. Companies across the supply chain, from foundries, equipment to fabless, continue to build domestic solutions to service the large local semiconductor demand.

Rapid AI Development Drives Semiconductor Demand In China

The rapid development of front-tier AI models and AI applications in China drives significant growth in AI compute demand locally. The acceleration of AI spending has raised China’s cloud capex by 48% in C2025E and 50% in C2026E (MS 2025)

The compute demand crisis has catalysed innovation in algorithmic efficiency, hardware alternatives, and energy management. As China continues to pursue AI leadership while navigating constraints, the world is witnessing the emergence of a distinct AI ecosystem with unique characteristics and capabilities that will likely influence global AI development for years to come. Domestic AI semiconductor solutions are positioned to benefit from the growing demand, especially when imported solutions such as H20 are restricted.