Nvidia is racing to boost production of its H200 artificial intelligence chips to meet soaring demand from Chinese technology firms and has approached contract manufacturer Taiwan Semiconductor Manufacturing Co (TSMC) to ramp up output, sources told Reuters.
Chinese companies have reportedly ordered more than 2 million H200 chips for 2026, while Nvidia currently holds only about 700,000 units in stock, two people familiar with the discussions said. A third source confirmed that Nvidia has asked TSMC to begin additional production in the second quarter of 2026, though the exact volume remains unclear.
The move underscores both the intensity of global demand for Nvidia’s AI chips and the supply pressures facing the industry. It also poses potential geopolitical risks, as Beijing has yet to approve imports of the H200, even after the U.S. government recently lifted restrictions on exports of the chip to China.
Balancing Supply and Political Risk
The U.S. Coast Guard’s decision to permit H200 sales subject to a 25% fee reversed the earlier export ban imposed by the Biden administration. But while Washington has given the green light, Chinese authorities have not yet decided whether to allow shipments, citing concerns about overreliance on foreign technology and its impact on the growth of the domestic semiconductor sector.
“Licensed sales of the H200 to authorised customers in China will have no impact on our ability to supply customers in the United States,” an Nvidia spokesperson said. “China is a highly competitive market with rapidly growing local chip suppliers. Blocking all U.S. exports undercut our national and economic security and only benefited foreign competition.”
TSMC declined to comment on the discussions, while China’s Ministry of Industry and Information Technology did not immediately respond to a request for comment.
Chinese Tech Giants Drive Demand
According to industry sources, most of the 2026 orders come from China’s leading internet and AI firms, which see the H200 as a major leap forward from current-generation processors. The chip part of Nvidia’s Hopper architecture uses TSMC’s 4-nanometre process and delivers about six times the performance of the H20, the downgraded version Nvidia had previously designed for the Chinese market.
Of Nvidia’s existing inventory, around 100,000 units are GH200 Grace Hopper superchips, combining the Grace CPU with the Hopper GPU architecture, while the rest are standalone H200 chips. Both types will be offered to Chinese buyers.
Pricing for Chinese clients is expected to average around $27,000 per chip, or roughly 1.5 million yuan for an eight-chip module. While this is higher than the 1.2 million yuan H20 module previously sold in China, analysts say buyers consider the H200’s performance-to-cost ratio attractive. It is also about 15% cheaper than comparable units sold on the grey market, which currently exceed 1.75 million yuan.
ByteDance, parent company of TikTok, reportedly plans to spend about 100 billion yuan on Nvidia chips in 2026 up from 85 billion yuan this year if Chinese regulators approve H200 imports, according to the South China Morning Post.
Global Supply Strains and Strategic Implications
If confirmed, the large-scale order would mark a major expansion of H200 production at a time when Nvidia is focusing on its newer Blackwell and upcoming Rubin chip lines. The company’s push to satisfy Chinese demand could exacerbate global supply shortages for AI processors, as data centre operators and cloud providers worldwide compete for limited inventory.
Analysts warn that Nvidia must strike a careful balance between maintaining its U.S. and European commitments and meeting Chinese orders. The regulatory uncertainty in China further complicates planning, with officials considering proposals that would require companies purchasing H200 chips to also buy a set ratio of domestically produced processors.
Despite the risks, the surge in demand from China underscores Nvidia’s dominance in the AI hardware market and highlights how political and economic pressures continue to shape the global semiconductor supply chain.
with inputs from Reuters
