Essay by Eric Worrall
China snatching defeat from the jaws of victory? Or a long game for China to seize control of the USA’s most valuable intellectual property?
Exclusive-Nvidia chips pile up in Hong Kong as China withholds import approval
Reuters
Thu, November 5, 2026 at 9:44 PM GMT+10 3 min readNov 5 (Reuters) – About 600,000 of Nvidia’s advanced artificial intelligence chips are stored in Hong Kong awaiting shipment to mainland China, two people familiar with the matter said, as Beijing withholds approval for large-scale imports despite demand from technology firms.
The size of the stockpile of H200 chips, which has not previously been reported, reflects Beijing’s reluctance to increase reliance on US technology. At the same time, Chinese companies need Nvidia’s advanced computing power to meet surging AI demand in the world’s second-largest economy.
China has allowed some of the chips to enter the country in recent months, three people familiar with the matter said. Several major Chinese internet companies have each obtained about 10,000 H200 chips in the past few months, one of the people said.
…But Beijing has yet to approve large-volume imports into mainland China, the people said.
Read more: https://ca.finance.yahoo.com/news/exclusive-nvidia-chips-pile-hong-114408223.html
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China is desperate to seize the lead from the USA in the race to superintelligence, a race which requires vast quantities of the most advanced AI chips.
California-based Nvidia’s chips outperform rivals on most benchmarks. Memory and other chip suppliers matter too, and China has made remarkable advances using the second-tier chips it has access to, but right now Nvidia’s chips outperform mainland Chinese rivals by a decisive margin. Nvidia is one of the key pillars of the USA’s AI advantage.
Yet at the same time China is desperate to grow their own advanced chip-making capacity. They recognise, rightly, that an AI advantage based on a commodity controlled by a rival is vulnerable to that rival slapping on export bans, which President Trump has done on several occasions.
The mountain of chips is a significant impediment to the development of domestic Chinese AI chip capacity. What is the point of investing in a Chinese AI chipmaker startup, if there is a mountain of chips more capable than anything you could hope to produce at scale any time soon, just waiting for some bureaucrat to sign the import documents?
While on the surface this looks like Beijing protecting its domestic chipmakers at the expense of its own AI companies, a self-inflicted wound worthy of communist bureaucracy at its finest, there may be a deeper game in play.
Because there is a way to break this import deadlock, and this is a risk the USA should be concerned about. If US-based Nvidia relocated to China, and built chip-making facilities on the Chinese mainland, Nvidia would no longer need import permits. China could eventually gain access to the world’s most advanced AI chips, and it could be the USA which would struggle with access to the best AI technology.
Nvidia relocating to China may be a genuine risk. Nvidia has to an extent entangled itself in its clients’ financial risks, by offering backstops and residual-value guarantees. This means if customers can’t pay, Nvidia could be on the hook for some of its clients’ financial pain – an issue which has concerned Nvidia enough that in September Nvidia was trying to find ways of insuring debt risk, though Nvidia’s level of exposure to this debt is unclear.
Nvidia’s chips are physically manufactured in Taiwan, so relocating Nvidia’s headquarters to China would not immediately resolve China’s chip technology deficits. But China would certainly welcome greater engagement in the form of a headquarters relocation.
When you consider what China stands to gain from this situation, the surface story of a self-inflicted wound starts to look a bit thin. Perhaps the hold on chip shipments to China is part of a long game to increase financial pressure on Nvidia, to coerce them into doing what China wants.
A hostile Democrat-controlled House and Senate could help push Nvidia and other AI players into the arms of China. I’m sure the Chinese would be happy to offer a sweetener in the hundreds of billions, to settle any financial problems and compensate investors, in return for seizing the crown jewel of the US AI industry. Let us hope lawmakers in the USA wake up to this peril to US national and financial security before it is too late.
There is no doubt China is taking a close interest in Nvidia. The news is currently full of stories about an alleged Chinese spy who tried to get close to the Nvidia CEO. You don’t have to be Einstein to realise China really wants what Nvidia has.
