US-China trade war has a surprise victim — Jensen Huang's Nvidia; why is the leading AI chipmaker involved?

The US-China trade war has rattled the corporate world, but AI chip manufacturing company Nvidia is seeing itself in a crossfire as the two countries spar with each other over tariffs and restrictions.

The Santa Clara, California-based company, led by Jensen Huang, is being used as a tool for negotiations by the US amid President Donald Trump's trade war with China, thanks to its meteoric success.

Is Nvidia allowing China to bypass trade restrictions?

The US China trade war has escalated ever since Trump announced sweeping tariffs on Beijing, and has now been centred around rare earth disputes.

This has further complicated Nvidia's relationship with China, where it was selling around 25 per cent of its graphics processing unit sales, as per a CNN report quoting Gil Luria, head of technology research at DA Davidson.

Its popularity has also embroiled Nvidia in accusations alleging that the company has been allowing China to skirt around export restrictions.

“Nvidia has gotten caught in the middle of two very important things: a trade dispute between China and the United States … but more importantly, AI has become a matter of national security,” Luria said.

Nvidia founder and CEO Jensen Huang has said that restricting companies from selling AI chips to China will backfire where Beijing may create its own technology.

Why is Nvidia embroiled in US-China tensions?

Over the past few years, America has been trying to restrict China's access to US technology to limit their progress on AI, and buy enough time for itself to take the lead.

When Trump came in as President, he continued the trend and restricted China’s access to chips, including Nvidia’s H20 chips.

However, the White House recently took a U-turn.

“You want to sell the Chinese enough that their developers get addicted to the American technology stack,” Commerce Secretary Howard Lutnick said in July.

Trump in August gave nod to sell AI chips to China in an agreement with US companies. Nvidia and AMD will give 15 per cent of their Chinese revenues to the US in exchange of export licences.

This has opened the sale of Nvidia's H20 sales to China, but Beijing seems to be unfazed.

Since April, China has increased import restrictions on US-made AI chips, including the ones manufactured by Nvidia.

Trump said on Friday on Truth Social that he would impose a 100 per cent tariff on China “over and above any Tariff they are currently paying” beginning November 1 over export controls on rare earth minerals.