Chinese tech giants including Alibaba (NYSE:BABA), Tencent (OTCPK:TCEHY) (OTCPK:TCTZF) and ByteDance (BDNCE) placed at least $16B in orders for Nvidia’s (NASDAQ:NVDA) H20 server chips used for AI in the first three months of 2025, ahead of a potential U.S. ban on the sale of the AI chip in China, The Information reported citing people familiar with the transactions.

The orders would potentially benefit Nvidia, but only if it can deliver the chips in advance of the new curbs, the report added.

Nvidia declined to comment in an email to Seeking Alpha.

Nvidia generated $17.11B in sales (about 13% of its total revenue of $130.5B) from China in the fiscal year 2025 ended Jan. 26.

In February, it was reported that Tencent, Alibaba and ByteDance (BDNCE) had "significantly increased" orders of the H20 chip amid rising demand for DeepSeek's (DEEPSEEK) low-cost AI models.

The growing demand presents a challenge, as Nvidia must determine to either go ahead with making the chips to secure more revenue or risk wasting the effort if the ban comes into effect.

The H20 is permitted for sale in China but other more powerful chips are banned from sale in the Asian country due to U.S. export restrictions which cite national security concerns.

The H20 chips are slower in performance than Nvidia’s new Blackwell chips, which the company sells in most markets outside China. However, Nvidia recently upgraded the H20 by combining it with the same powerful HBM chips it uses for the Blackwell system, the report added, citing the people with knowledge of the order.

Many Chinese companies have ordered the upgraded version, which strengthens the performance for training and running AI, according to the report.

The Trump administration has been thinking of banning the sale of the H20 chips to China to further restrict the country's technological rise. The fear of a potential ban prompted these companies to increase their orders in recent weeks, the report added.

Alibaba, ByteDance and Tencent did not immediately respond to a request for comment from Seeking Alpha.

Nvidia has not booked enough chip production capacity at its manufacturing partner Taiwan Semiconductor Manufacturing (NYSE:TSM) to meet increasing demand, the report added. Nvidia and TSM can increase capacity, but producing many H20 chips could take up to six months, which means that many orders would not be ready for delivery until the fourth quarter, the report noted.

If Nvidia decides to go ahead with reserving additional chipmaking capacity for the H20 semiconductors with TSM, it could lead to a risk of having to find new buyers when the ban comes into effect before it can deliver the orders.

As the H20 is inferior compared to the Blackwell chips, Nvidia may have to provide price discounts to sell them to non-Chinese customers. And if the U.S. restricts H20s before Nvidia delivers the chips, customers could request refunds, and the company would have to find new buyers for the inventory, the report added.

The White House and TSM did not immediately respond to a request for comment from Seeking Alpha.

TSM said to the media out let that it does comment on individual customers or market speculation.

Nvidia also faces challenges from local giant Huawei Technologies in the China chip market. Last month, Nvidia's CEO Jensen Huang talked about Huawei, which has seen a resurgence in its smartphone and AI chip development business. "Huawei is the single most formidable technology company in China,” Huang had said. He noted that U.S.-led efforts to restrict Huawei have been “done poorly” given Huawei’s continued success. “I think that their presence in AI is growing every single year,” said Huang. “We can’t assume that they are not going to be a factor.”

In January, it was reported that ByteDance (BDNCE) seeks to spend over $12B on AI infrastructure in 2025 and has allotted a budget of RMB 40B ($5.5B) to acquire AI chips in China this year.