Chip giant Nvidia has formally acknowledged growing competition from Huawei, even as the Chinese telecommunications and technology company continues to operate under strict U.S. sanctions.

In its latest annual filing on Wednesday, Nvidia explicitly listed Huawei as a key competitor for the second consecutive year. This development marks a significant shift in the tech industry, as Huawei had not appeared in Nvidia’s competitor list for at least three years prior.

The move underscores Huawei’s rapid resurgence despite U.S. efforts to cripple its technological advancement.

Nvidia’s report highlights Huawei’s growing presence across critical sectors, including semiconductor chips, cloud services, computing processing, and networking products.

Speaking on the competitive landscape, Nvidia’s CEO Jensen Huang acknowledged the increasing challenge posed by Chinese firms, particularly Huawei. In an interview with CNBC’s Jon Fortt on Wednesday, Huang described Huawei as “vigorous and very, very competitive,” emphasizing that China’s domestic tech industry has remained resilient despite external pressures.

“There’s a fair amount of competition in China.

“Huawei, other companies, are … quite vigorous and very, very competitive,” Huang said.

U.S. Sanctions and Huawei’s Remarkable Defiance

Huawei’s continued growth is particularly striking given the heavy sanctions imposed by the United States since 2019. The U.S. government blacklisted Huawei over alleged national security concerns, accusing the company of having close ties to the Chinese government and military. These sanctions effectively cut Huawei off from critical American technology, including advanced semiconductor chips, software, and essential hardware components.

The restrictions severely disrupted Huawei’s operations, especially its lead role in the 5G rollout and once-dominant smartphone division, which relied heavily on U.S.-made processors and Google’s Android operating system. By 2021, Huawei’s revenue had plummeted by nearly 29%, and it was widely believed that the company’s days as a global tech powerhouse were numbered.

However, Huawei has stunned the world by finding ways to circumvent these restrictions and rebuild its technological capabilities. The company poured billions into domestic research and development, accelerating efforts to create homegrown alternatives to Western technology. Its most significant breakthrough came in semiconductor chip design, a sector long dominated by U.S. firms like Nvidia, Qualcomm, and Intel.

Despite being banned from acquiring advanced chips from American suppliers, Huawei, through its chip-design arm HiSilicon, managed to develop its own cutting-edge processors. The company’s Mate 60 Pro smartphone, released in 2023, featured a breakthrough semiconductor chip that enabled 5G-like speeds, shocking industry analysts who believed Huawei lacked the capacity to manufacture such advanced chips without U.S. technology.

Huawei’s comeback was not limited to hardware alone. The company recognized the need to develop its own software ecosystem after being banned from using Google’s Android operating system. In response, Huawei accelerated the development of HarmonyOS, a proprietary operating system initially designed for smart devices. By early 2025, Huawei unveiled HarmonyOS NEXT, its first fully self-developed operating system, marking a major milestone in China’s push for technological independence.

With HarmonyOS NEXT, Huawei effectively eliminated its reliance on U.S. software, a move that further strengthened its position in the global tech market. The operating system’s integration into the newly launched Mate 70 series signified a new era for Huawei’s smartphone division, proving that the company could not only survive but also compete head-on with industry giants like Apple and Samsung.

The fact that Nvidia, the world’s leading AI chip manufacturer, has formally recognized Huawei as a major competitor suggests that Huawei’s influence in semiconductors and AI computing is growing at an unprecedented pace.

While Nvidia still dominates the market for AI-focused chips, Huawei has aggressively expanded its own AI computing capabilities, investing heavily in data centers, AI-driven cloud services, and networking infrastructure. This expansion is particularly concerning for U.S. policymakers, as it signals that China is rapidly closing the gap in areas where the U.S. previously held an undisputed technological advantage.

Nvidia’s concerns also reflect the wider battle for technological supremacy between the U.S. and China. The Biden administration tightened export controls, restricting American companies from selling AI chips and advanced semiconductor manufacturing tools to China. However, Huawei’s ability to navigate these restrictions and continue its rise underlines that U.S. sanctions are losing their effectiveness.

The rivalry between Huawei and Nvidia is expected to escalate in the coming years, particularly in the fields of AI computing, cloud services, and semiconductor innovation.

Nvidia has lost its place in the exclusive $3 trillion market cap club, leaving Apple as the only publicly traded company still holding that valuation.

The decline comes as Nvidia’s stock tumbled in the wake of its latest earnings report, sparking renewed concerns over whether the chipmaker’s dominance in the AI industry is beginning to face real challenges.

After Nvidia’s shares dropped 8.5% on Thursday, the company saw its market capitalization shrink to $2.94 trillion, wiping out an estimated $273 billion in value in just one day. Although the stock rebounded slightly on Friday, gaining about 1%, it was not enough to restore Nvidia’s previous position above the $3 trillion mark.

This steep decline highlights that Nvidia is not yet free from the lingering effects of DeepSeek’s emergence, a development that has sent ripples through the semiconductor industry and significantly impacted Nvidia’s stock in recent months.

The growing influence of DeepSeek, an AI research and semiconductor company backed by China’s leading tech giants, has raised concerns over Nvidia’s long-term dominance in the AI chip sector.

DeepSeek, which made headlines late last year, has been aggressively developing high-performance AI chips that are being positioned as direct competitors to Nvidia’s GPUs. The company, reportedly supported by Alibaba, Tencent, and other Chinese investors, aims to create advanced AI processing units that bypass U.S. sanctions on semiconductor exports to China.

As a result, the emergence of DeepSeek has been viewed as a potential game-changer in the AI and semiconductor industries, as it introduces a powerful new competitor into a market that Nvidia has long dominated. Investors reacted swiftly when news of DeepSeek’s advancements began circulating in late 2024, leading to a brief tech stock sell-off that affected major U.S. chipmakers, including Nvidia and AMD.

For Nvidia, this was particularly alarming given that China accounts for a significant portion of its AI chip sales. The company has been struggling with export restrictions imposed by the U.S. government, limiting its ability to sell its most advanced GPUs to Chinese firms. DeepSeek’s rapid progress presents an additional challenge, as it reduces China’s dependence on Nvidia’s products altogether.

The fear that DeepSeek could capture a sizable market share in China has weighed heavily on Nvidia’s stock, contributing to its recent volatility. Analysts have pointed out that while Nvidia still leads in terms of AI chip performance, the geopolitical landscape and increasing competition from Chinese firms could threaten its long-term growth prospects.

Even before the DeepSeek threat materialized, Nvidia had been facing mounting concerns from investors over several key issues, including:

1. The potential for stricter U.S. export controls on AI chips, which could further limit Nvidia’s ability to sell to key international markets.
2. Growing fears that AI models are becoming more efficient, reducing the need for the most powerful GPUs that Nvidia specializes in producing.
3. Worries about a slowdown in AI infrastructure investment, particularly from large cloud service providers like Microsoft, Google, and Amazon, which account for a significant chunk of Nvidia’s revenue.

These concerns have led to increased profit-taking among investors, as many seek to lock in gains after Nvidia’s historic stock surge in 2023 and 2024. The latest earnings report, while strong, failed to fully ease worries about the company’s future growth trajectory.

Despite the stock decline, Nvidia’s latest earnings report was solid, with the company delivering results that exceeded analyst expectations.

Revenue for the most recent quarter came in at $39.33 billion, marking a 78% increase from the previous year. Nvidia’s data center revenue alone surged 93%, reaching nearly $36 billion, a reflection of the continued demand for its AI chips.

CEO Jensen Huang reassured investors that the company’s outlook remains strong, particularly as next-generation AI models require even more processing power. He explained that AI models are evolving to think and reason step by step, a process that demands significantly higher computational capabilities.

“The amount of computation necessary to do that reasoning process is 100 times more than what we used to do,” Huang told CNBC in an interview.

Additionally, Nvidia confirmed that production issues for its upcoming Blackwell chip have largely been resolved, setting the stage for a strong start to fiscal 2026. However, even with these reassurances, the stock continued to slide, underscoring the broader concerns hanging over the semiconductor industry.

Semiconductor Challenges and AMD’s Struggles

Nvidia’s struggles are not occurring in isolation. The broader semiconductor sector has been under pressure, with other major chipmakers also experiencing significant stock declines.

AMD, one of Nvidia’s biggest competitors, has been particularly hard hit. The company’s stock has dropped over 10% this week and is now down more than 13% since early February. The sell-off was triggered by a disappointing fourth-quarter earnings report, which showed that AMD’s data center revenue fell short of expectations.

The weaker-than-expected results have fueled speculation that AMD is struggling to compete with Nvidia in the AI chip market, further reinforcing Nvidia’s dominance in the sector. However, given the rapid developments in AI and the emergence of new competitors like DeepSeek, Nvidia’s position at the top is no longer as secure as it once was.

However, Nvidia’s stock is still worth five times more than it was two years ago, at the start of the generative AI boom.

While the short-term sell-off reflects concerns about competition, geopolitical risks, and slowing AI investment, many analysts believe that Nvidia remains well-positioned to capitalize on the continued expansion of AI technologies.

Still, the question remains: Can Nvidia quickly bounce back and reclaim its $3 trillion valuation, or is this the beginning of a more prolonged correction?