DeepSeek Haunts Jensen’s Worst Nightmare Again… As China Ghosts NVDA's H20 Chip ($20B Hit Incoming)

“Chat, we are cooked.”

That’s probably the exact Slack message Jensen Huang just sent his COO after hitting pause on production of Nvidia’s China-only H20 chip. You know, the “diet GPU” designed to sidestep U.S. export bans? Yeah, Beijing basically just turned the lights off on that project. And the timing couldn’t be worse. Nvidia reports earnings in less than a week. Perfect time for a self-inflicted black eye, right?

Remember, Nvidia had been banking on the H20 chip to claw back some China revenue after Donnie Politics and his restrictions kneecapped its AI sales earlier this year. Jensen even scored a partial win last month… lobbying the Trump administration to allow shipments again (with a 15% “America First” royalty payment to Uncle Sam). But then Beijing stepped in with the equivalent of “thanks, but that’s gonna be a no from me, dawg.” (Which is also how I responded to the pest control salesman at my front door yesterday).

Chinese regulators pretty much called “cap” on Nvidia’s chips… accusing them of sneaking in some spyware cheat code. Huang hit back with the classic “we don’t even have backdoors, bro,” but the vibes were already cooked. Beijing then told ByteDance, Tencent, and Alibaba to stop ordering H20s while they run a “national security review.” Translation: we don’t trust you, and also f* you.

(Source: CNBC)

So instead of wasting a bunch of money on orders that might never be filled… Nvidia told Amkor, Samsung, and Foxconn: pack it up, boys. And just like that production was halted.

To make matters worse, China’s homegrown AI prodigy DeepSeek picked this exact moment to roll out its new V3.1 model… the upgrade nobody at Nvidia wanted to see. It’s faster, runs a slick FP8 precision format, and comes with a “reasoning mode” that lets the system toggle between heavy-duty logical reasoning tasks (think math, problem-solving, code generation) and lighter, low-lift inference jobs like text or image recognition. And get this… it’s optimized for domestic processors. Meaning no Nvidia needed (a nightmare straight out of Jensen’s stress dreams).

Let’s not forget… this is the same startup that back in January spooked Nvidia so badly with its R1 model that roughly $600 billion in market value went “poof” almost overnight. And now, just in time for spooky season, they’re back for round two… lumbering in like Michael Myers in yet another Halloween sequel nobody asked for but still shows up in theaters every October.

Of course, some Nvidia superfans (the same guys with 100% of their portfolio in NVDA and a Jensen Huang poster above their bed) are brushing this off with a casual “it’ll be fine.” But China makes up about 13% of Nvidia’s revenue, and analysts say if the H20 gets iced for good, that’s $2-3 billion in quarterly sales gone and up to $20 billion a year at risk. Bernstein even warned that by 2027, local Chinese chipmakers could be running the table while Nvidia’s stuck watching from the sidelines. I don’t know about you but that doesn’t exactly sound “fine” to me.

Oh, and don’t forget Nvidia already took a $4.5 billion writedown this year on unsold H20 inventory. I did the math… with a US population of 335 million, that’s enough money to buy every American a Crunchwrap Supreme and still have spare change for some cinnamon twists.

Before this nightmare of a Friday… Wall Street was expecting Nvidia to print numbers higher than a Snoop Dogg/Willie Nelson collab… $130 billion in sales by 2025, growing to $300 billion by 2027. Which are lofty goals without any of this mess. But between short sellers screaming about power grid shortages, Beijing ghosting the H20, and DeepSeek coming back to wreck Jensen’s world, Nvidia’s air of invincibility is starting to look… well, vulnerable.

Don’t get me wrong… Jensen is still the king of GPUs, and the first DeepSeek scare was 10x worse than this. But that one was all rumors and overreaction. This time (assuming DeepSeek isn’t crying wolf again) the walls of the castle actually look like they’re starting to crack.

At the time of publishing this article, Stocks.News doesn’t hold positions in companies mentioned in the article.