Nvidia H20 Chip “Backdoor” Controversy Escalates as Reports Say Nvidia Asks Suppliers to Halt H20 Production

TradingKey - According to The Information, citing unnamed sources, Nvidia (NVDA), the global leader in AI chips, has instructed key suppliers including Samsung Electronics and Amkor to pause production related to its H20 chip. This supply chain disruption, triggered by allegations of a security “backdoor,” could cast a shadow over Nvidia’s upcoming Q2 earnings report.

The report said Nvidia issued the instructions this week after the Chinese government urged domestic firms to avoid using the H20 chip. In after-hours trading on August 22, Nvidia’s stock fell more than 2%.

Last month, reports emerged that Nvidia’s computing chips were equipped with tracking, geolocation, and remote shutdown capabilities — features perceived as potential security threats. By the end of July, China’s Cyberspace Administration (CAC) summoned Nvidia for talks, demanding the company explain and submit documentation on the security risks related to backdoors in the H20 chips sold in China.

Last week, it was reported that Chinese authorities had sent notices to enterprises advising them to avoid using H20 chips, especially in government-related applications. Although recent U.S.-China trade talks led to the lifting of restrictions on high-end chip exports to China, the balance of power in the chip sales landscape now appears to be shifting in China’s favor.

In response, Nvidia CEO Jensen Huang said that they are very grateful that the U.S. government approved the export license for the H20, a chip specifically designed for the Chinese market. China has recently raised some concerns about security backdoors in chips.

Huang emphasized that the H20 does not have a security backdoor and expressed hope that the issue would be resolved. He added that whether to offer a new product for AI data centers in China — as a follow-up to the H20 — is not something they can decide on our own.

Nvidia is set to release its Q2 FY2026 earnings on August 27, with investors closely watching for updates on AI demand growth, Blackwell GPU production ramp-up and esumption of shipments for China-market products.

It remains unclear whether H20 supply will resume as expected. Despite the controversy, several Wall Street firms have raised their price targets on Nvidia this week:

• Cantor Fitzgerald raised its target from $200 to $240
• Wedbush lifted its target to $210

Both are significantly above Nvidia’s latest closing price of $174.98, reflecting strong confidence in its long-term AI leadership.

Coincidentally, Jensen Huang made an “unexpected” visit to Taiwan on August 22 — a trip that comes at a highly sensitive time, as the H20 chip faces challenges in resuming shipments to China.