Nvidia is planning to establish a new research and development center in Shanghai as part of a broader effort to maintain its competitiveness in the Chinese market, even as Washington’s export restrictions continue to squeeze the U.S. chipmaker’s sales in the country. The plans, first reported by the Financial Times, reflect Nvidia’s complex balancing act between adhering to U.S. trade rules and retaining access to one of its largest global markets.
Nvidia CEO Jensen Huang discussed the project during a meeting with Shanghai mayor Gong Zheng last month, sources familiar with the matter told the Financial Times. The company is already leasing additional office space in the city to support both its existing workforce and the prospective expansion tied to the R&D initiative.
While the core design and production of Nvidia’s graphics processing units (GPUs) will remain offshore to avoid legal and security concerns surrounding intellectual property, the Shanghai center would tailor product research to meet Chinese market demands and help navigate the technical challenges imposed by U.S. export controls.
“We are not sending any GPU designs to China to be modified to comply with export controls,” Nvidia said in a statement to the Financial Times, underscoring that the new operation would not compromise compliance with U.S. laws.
According to sources, the Shanghai team will also contribute to global R&D initiatives, including chip design verification, product optimization, and research into specific application areas such as autonomous vehicles. The effort is also aimed at tapping into China’s deep pool of AI talent — a key strategic advantage in a fast-moving sector.
Nvidia has begun recruiting engineers in Shanghai to help guide the development of next-generation AI hardware and software. The company currently employs about 2,000 people in the city, primarily in sales and support roles.
The initiative comes as Nvidia faces mounting pressure from local Chinese competitors, particularly Huawei, which is developing its own AI chips and ecosystem. With China making up approximately 14% of Nvidia’s revenue — an estimated $17 billion last year — Huang has expressed concerns that a full retreat from the Chinese market could hand over dominance to rivals.
“We want to build the world’s AI [where] American standards are being adopted around the world,” Huang said at the Milken Institute last week. “If we leave a market altogether, there’s no question somebody else would step in. Huawei, for example, is very formidable . . . they’ll step in.”
Despite Nvidia’s efforts, geopolitical headwinds persist. The Trump administration this week warned that companies using Huawei-made AI chips could face criminal penalties under existing export laws. This adds to existing challenges Nvidia faces in selling its H20 chip—a downgraded model created to comply with Biden-era restrictions—which has now been further restricted.
In response, Nvidia has been offering lower-end L20 processors without high-bandwidth memory to Chinese clients. However, industry insiders say these chips struggle to match local offerings in terms of performance, leaving customers with difficult decisions.
“We are in an awkward situation where we either choose a worse Nvidia chip that runs on [its software system] Cuda, which means lower operational cost, or switch to Chinese chips altogether and live through the pain of switching systems,” said an executive at a major Chinese tech firm.
Clients such as ByteDance, Alibaba, and Tencent are reportedly monitoring developments closely, hoping Nvidia can engineer a high-performance chip that complies with export rules. However, no definitive plans have been made due to ongoing legal uncertainty.
Nvidia’s Shanghai expansion signals a continued commitment to China — a market CEO Jensen Huang believes could reach $50 billion in the coming years — while navigating the tightening grip of U.S. export policies and rising Chinese tech nationalism.
