In the rapid race for supremacy in the market for artificial intelligence (AI) chips in China, Nvidia is unexpectedly lowering the prices of its most advanced product – a risky move given the intense competition from tech giant Huawei.

The US semiconductor producer Nvidia is swimming in stormy waters in the Chinese market. The company is suffering from the current US sanctions on AI chip exports and the increased competition.

According to Reuters, overproduction coupled with weak demand has led Nvidia to sell its cutting-edge H20 AI chip at a price lower than that of Chinese rival Huawei.

To compensate for US sanctions and maintain its dominance in the AI ​​chip market, Nvidia introduced three chips specifically designed for the Chinese market late last year. However, the H20, Nvidia’s most powerful product in China, is being sold at a discount of over 10 percent compared to Huawei’s most powerful AI chip, the Ascend 910B, much to the company’s chagrin due to low demand. Market analysts see this as a warning sign and an indication of an increasingly uncertain future for the US company in a market it cannot afford to lose.

According to Chinese market research firm CCID Consulting, China is expected to account for over 30 percent of the global AI industry by 2035. Given this forecast and current developments, analysts and investors are increasingly concerned. “As US tensions continue, Nvidia is definitely preparing for the worst,” Hebe Chen, market analyst at IG, told Reuters.

This concern is reflected in Nvidia’s recent quarterly results. There, the company warned that its business in China is “significantly” lower than in the past. “Our data center sales in China have declined significantly since the new export control restrictions took effect in October,” said CFO Colette Kress.

Meanwhile, Huawei has begun to challenge Nvidia’s dominance in the AI ​​chip market. The inside sources reported that the Guangdong-based company plans to massively increase shipments of its powerful Ascend 910B chip this year. This chip already outperforms Nvidia’s H20 in some key metrics, further strengthening Huawei’s position.