Don’t buy Nvidia CEO Jensen Huang’s China AI policy ‘failure’ story

When Nvidia CEO Jensen Huang appeared at Computex in Taipei last week, his presence dominated headlines. But it wasn’t his keynote that drew political attention — it was what he said after the speech.

In interviews on the sidelines of the event, Huang sharply criticized U.S. export controls on AI chips, calling them a “failure.” He blamed both the Trump and Biden administrations for triggering a collapse in Nvidia’s China business, claiming that the company’s market share in the country dropped from 95% to 50% over four years, and disclosed a multi-billion dollar write-down on unsold H20 chips blocked from sale. Huang further argued that these restrictions have only pushed Chinese firms to innovate faster, intensifying competition.

The Nvidia CEO’s complaints about U.S. policy continued after Wednesday’s earnings report, with Huang saying China is “effectively closed.”

“Export restrictions spurred China’s innovation,” Huang said during the earnings call. “The U.S. has based its policy on the assumption that China cannot make AI chips. Assumption was always questionable. Now it’s clearly wrong.”

“The question is not whether China will have AI. It already does,” he added.

On Wednesday, Chinese generative AI company DeepSeek, whose debut was the watershed moment in China’s arrival as a competitor to the best the U.S. has to offer in the AI race, released a new model.

While Huang’s frustrations may resonate with some in the business world, they badly miss the strategic mark. The semiconductor policies Huang criticizes were never designed to protect Nvidia’s commercial interests in China. They were, and remain, about U.S. national security.

The Biden administration’s controls, building on Trump-era efforts, reflect a sober reality: the U.S. cannot afford to fuel the military rise of its chief strategic rival. Advanced chips power the modernization of the People’s Liberation Army, including command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) systems. These restrictions are not about quarterly earnings — they are about avoiding scenarios where American troops face U.S.-designed technology on the battlefield.

Critics like Huang claim these controls have backfired, accelerating China’s tech independence. But that effort didn’t begin with the 2022 restrictions. It was formalized years earlier through the “Made in China 2025” strategy, approved by the State Council in 2015. With over $150 billion in state support, China’s chip sector has long aimed to reduce dependence on foreign suppliers. The controls didn’t start this race; they were a response to it.

In an interview with CNBC’s Jim Cramer on “Mad Money” on Wednesday, Huang said 50% of the world’s AI developers are in China and “we want the world to build on America’s IT stack. … that’s the most important strategic reason to be in China.”

But as China continues to race against the U.S. in AI, it should not be done by exploiting the U.S. or with U.S. companies willingly helping it. Furthermore, China is making its own decisions regardless of U.S. export controls to favor its own companies, a goal it had well before the Trump or Biden export controls. This may be inconvenient history, but it is history, nonetheless.

China’s innovation model is evolving. While foreign technology transfer and joint ventures played early roles, Chinese firms now combine global know-how with massive capital, targeted industrial policy, and relentless domestic competition. China ranks second in global R&D spending and leads in green tech, EVs, and high-speed rail. It extracts what it can from foreign firms, and then moves on. The U.S. must safeguard leading-edge technologies and delay diffusion for as long as possible. This is not a permanent advantage, but it is a necessary one.

Look at sectors where the U.S. failed to act — solar panels, EV batteries, telecom. In each case, China leapfrogged the West and locked in global dominance. But contrast that with aviation, where the U.S. has maintained strict export controls and upheld a high regulatory bar. China’s COMAC, although making noteworthy gains, remains far behind Boeing and Airbus in capability, global market access, safety certifications, and production reliability. Where the U.S. held the line, it held its lead.

Nvidia’s arc in China follows a familiar pattern. Foreign firms are welcomed, dominate temporarily, and are ultimately displaced. We all know the story by now — Apple, Tesla, Starbucks — all have faced this trajectory. Huang’s claim that U.S. policy ended Nvidia’s privileged…