This week at the World Artificial Intelligence Conference in Shanghai, Huawei showcased its new AI computing system, called the CloudMatrix 384. This new super-node architecture system combines 384 of its Ascend 910C chips. And this cluster approach appears to rival the performance of Nvidia’s most advanced chips.

This was big news.

Just one year ago, Nvidia had an unchallenged global monopoly in the high-end GPUs required for Generative AI. This is why from 2023-2025 Nvidia’s market capitalization surged from $1 to $4 trillion USD, making it the world’s most valuable company. And four years ago, Nvidia had about 95% of the China market (according to Jensen Huang).

US-based Nvidia is the leader supplier of the most important foundational technology of our time. And it had a natural monopoly in its space, by virtue of its ecosystem, network effects and economies of scale. It became the most valuable company in the world.

And then the US government did what the markets couldn’t. It broke Nvidia’s monopoly.

By banning Nvidia sales of A100s and H100s to China, US government created an opening. This meant $10B in unmet demand. The recent ban of the scaled down H20 in April 2025 alone created a $5.5B loss for Nvidia. Today, Nvidia has about 50% of the China market, mostly because of limitations of the products it can sell (according to Jensen Huang).

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Huawei and others have been racing to fill this gap. And Huawei’s new Ascend 910c (in its CloudMatrix configuration) is the leading contender.

In response, the US government has reversed its ban on H20 sales to China. Mostly at the urging of Nvidia CEO Jensen Huang who repeated pointed out that half of the world’s AI researchers are in China. And that restricting NVIDIA’s sales could strengthen domestic competitors, potentially eroding NVIDIA’s software advantage (especially CUDA).

But it is too late. The monopoly has been broken.

In fact, it was too late back in 2019.

The Entity List and Why Chinese Companies Will Never Rely on US Tech Again

In July 2019, I was at the Huawei headquarters in Shenzhen. I advise international businesses on accelerating their online growth so spend a lot of time visiting and studying China’s digital leaders.

The Huawei event was about its financial results. But this was just three months after the entity list ban. So that was the big topic. And I ended up sitting behind Chairman of the Board Liang Hua, the guy everyone was waiting to hear from.

Chairman Hua described their situation as analogous to a plane being hit by anti-aircraft fire. They were riddled with bullets. And two rounds had hit the engine. But they were still flying.

As he was talking, there was a picture of a shot up World War 2 bomber behind him.

The bullet hits he was describing were the loss of thousands of components used in the supply chains of their telecommunications and consumer businesses. Huawei would spend the next years replacing parts and redesigning products.

The two rounds that hit the engine were the loss of high-end semiconductors and the loss of the Android operating system. This was a serious hit to their smartphone business. Just months earlier, Huawei had been on the verge of becoming the global leader in smartphones.

Watching this, my conclusion was this was a major strategic mistake by the USA.

Not only would it not slow or stop Huawei. It would actually accelerate their technological progress. It would re-invigorate the company.

And sure enough, Huawei’s leadership leaned into the crisis. They didn’t downplay it. They called it a fight for survival. And it mobilized their +200,000 employees.

Within 1-2 years, Huawei had repaired and restructured most of its impacted supply chain. Its core telecommunications continued to thrive internationally. And they then successfully launched a new operating system (HarmonyOS), which is now on the verge of breaking the Android / iOS global duopoly (in Asia).

And then in November 2024, Huawei shocked the world – and especially the US government.

Without any announcements, Huawei released its Mate 70 smartphone, which was running their Kirin 9100 chipset. Which were manufactured with a 7nm process at SMIC. Huawei was back in the high-end smartphones business.

And now just 7 months later, Huawei has released its new chip architecture. Which is dramatically narrowing the gap with Nvidia’s leading 3nm chips.

So what did the US government achieve?

It convinced every business leader, government official and developer in China of the importance of being independent of politically weaponized US technology.

So, it wasn’t just Huawei that began mobilizing in 2019. It was the whole country. The recent reversal of the H20 ban wont’ change this.

It gets worse.

US Tech Restrictions Are Fueling a China Tech Boom

Last month, I was at Alibaba Cloud in Hangzhou and we were discussing the latest advancements in their Qwen foundation models. They are really impressive. Alibaba is on the frontier of Generative AI globally.

And they’re not alone.

Alibaba, DeepSeek and others have emerged as leading players in low-price, open-source models. Which companies around the world are rapidly adopting.

And earlier that morning, I had stopped by the Unitree Robotics office. This Hangzhou-based business is now famous internationally for its viral videos of robodogs doing flips and crazy acrobats. And just last week, Unitree released its new R1 humanoid robot with 26 joints. At a starting price of US$5,900.

And, just for fun, we stopped by the DeepSeek headquarters on the way to the airport. Alas, I couldn’t get past the lobby. But the building was nice and I was on the lookout for CEO Liang Wenfeng at the Family Mart in the lobby.

Across the GPU-driven tech world, we are currently seeing a China tech boom. It’s undeniable. For example:

• In Generative AI, there is DeepSeek and Alibaba’s Qwen, as mentioned. There is also Tencent Cloud’s Hunyuan and Baidu’s Ernie.
• In video generation, there is China’s Minimax and Kling AI.
• In robotics, there is Unitree, UBTech, and others. Note: in 2024, China accounted for 51% of global robot installations.
• In drones, there is DJI, which has 70% of the world consumer market. And there is flying robotaxi company EHang, which YouTuber IShowSpeed recently flew in.
• And, of course, in EVs, there is BYD, whose new Seagull car sells for $7,800. Ford CEO Jim Farley recently said “it’s the most humbling thing I’ve ever seen. 70% of all EVs in the world…are made in China…they have far superior in vehicle technology.”

Question:

Is this what the US government hoped to achieve with its attempts to slow China’s technological advancement?

To be fair, China’s current tech boom is the predictable result of several factors:

• Tech leadership in Generative AI.
• A manufacturing ecosystem at very large scale. Note: Silicon Valley doesn’t have factories.
• Brainpower at scale. China has half the world’s AI researchers. And graduates +2M engineers per year.
• A highly entrepreneurial culture. With a vibrant VC ecosystem to support it.
• A big domestic market. Which enables successful domestic businesses to go international from a position of strength.

So, the current tech boom in China was going to happen anyways. But the US government has 100% accelerated it with its actions. And Nvidia will likely pay the biggest price.

Sorry Jensen.

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This article was published in shorter form here at China Daily.

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• How Alibaba.com Re-Ignited Growth with the Alibaba Management Playbook (Tech Strategy – Podcast 253)
• How Amap Beat Baidu Maps. My Summary of the Alibaba Playbook. (Tech Strategy – Podcast 252)
• Scale Advantages Are Key. But Competitive Advantages Are More Specific and Measurable. (Tech Strategy)

From the Concept Library, concepts for this article are:

• n/a

From the Company Library, companies for this article are:

• Nvidia
• Huawei

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I am a consultant and keynote speaker on how to accelerate growth with improving customer experiences (CX) and digital moats.

I am a partner at TechMoat Consulting, a consulting firm specialized in how to increase growth with improved customer experiences (CX), personalization and other types of customer value. Get in touch here.

I am also author of the Moats and Marathons book series, a framework for building and measuring competitive advantages in digital businesses.

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