Nvidia Races to Boost AI Chip Supply as Demand From China Surges
A Sudden Surge in Demand
Nvidia is facing mounting pressure to scale up production of its H200 artificial intelligence chips as demand from Chinese technology companies accelerates sharply. According to sources familiar with the matter, orders placed by Chinese firms for 2026 delivery have already exceeded two million units. This figure far outpaces Nvidia’s current inventory, which stands at roughly 700,000 chips, highlighting a widening supply gap.
The surge underscores how central advanced AI hardware has become to China’s technology ambitions. Despite ongoing geopolitical frictions and export controls, Chinese companies continue to seek high performance computing power to support data centers, cloud services, and large scale AI model training.
Turning to TSMC for Capacity
To address the imbalance, Nvidia has reportedly approached Taiwan Semiconductor Manufacturing Co to increase output of the H200 chips. While the exact volume under discussion has not been disclosed, sources indicate that Nvidia has asked TSMC to begin preparing for additional production runs. Manufacturing work is expected to start in the second quarter of 2026.
This move reflects Nvidia’s heavy reliance on TSMC’s advanced fabrication capabilities. As one of the few manufacturers able to produce cutting edge AI chips at scale, TSMC plays a critical role in determining how quickly supply can respond to demand shifts.
Why the H200 Matters
The H200 chip is designed for high end AI workloads, including training and inference for large language models. Its performance improvements over earlier generations make it particularly attractive for companies competing in AI driven services. For Chinese technology firms, access to such chips can significantly affect competitiveness in areas ranging from cloud computing to autonomous systems.
The scale of orders suggests that Chinese demand remains robust even as companies diversify suppliers and explore domestic alternatives. High end foreign chips still offer performance advantages that are difficult to replicate quickly, reinforcing their strategic value.
Inventory Pressure and Timing
Nvidia’s current stock levels illustrate the challenge. With only around 700,000 H200 units available against orders exceeding two million, the company faces a tight supply situation that could persist well into 2026. The timing of additional production therefore becomes critical.
If TSMC begins manufacturing in the second quarter of 2026, it could take several months before finished chips are delivered. This lag highlights how semiconductor supply chains respond slowly to sudden demand spikes, even for the industry’s largest players.
China’s Role in the AI Hardware Market
China has emerged as one of the largest markets for AI accelerators, driven by massive investments in data infrastructure and digital services. Demand is being fueled by both private technology firms and broader industrial digitalization. Even with regulatory constraints, the market’s scale makes it difficult for global chipmakers to ignore.
For Nvidia, balancing regulatory compliance with commercial opportunity remains a delicate task. The company must navigate export rules while responding to one of its most significant sources of demand.
Implications for the Semiconductor Industry
The situation highlights broader pressures across the semiconductor ecosystem. Advanced manufacturing capacity is finite, and surges in AI demand can strain even well planned production schedules. Companies like TSMC are forced to prioritize among customers, while chip designers must forecast demand years in advance.
It also underscores how AI has reshaped chip market dynamics. Demand is no longer driven primarily by consumer electronics cycles but by large scale infrastructure investments that can shift rapidly.
A Test of Supply Chain Flexibility
Nvidia’s push to ramp up H200 production will serve as a test of supply chain flexibility in an era of geopolitical uncertainty and technological acceleration. Whether TSMC can deliver additional capacity quickly enough will shape Nvidia’s ability to meet customer expectations in China and beyond.
As AI competition intensifies globally, access to high performance chips is becoming a strategic differentiator. The current scramble illustrates how demand from a single major market can ripple through the entire semiconductor value chain, influencing production plans, investment decisions, and the pace of innovation.
