Nvidia Corp. (NVDA) has a problem most companies would love to have: too much demand and not enough supply. But when Chinese tech giants start ordering chips by the millions and you've only got hundreds of thousands on hand, that math gets uncomfortable quickly.
When Demand Exceeds Supply by 3x
Here's the situation. Chinese technology companies have placed orders for more than 2 million of Nvidia's H200 AI chips destined for delivery in 2026. Nvidia had approximately 700,000 units available. That's not a small gap to bridge.
The strain has pushed Nvidia to lean on Taiwan Semiconductor Manufacturing Co. (TSM) to crank up production. According to a Reuters report citing sources familiar with the matter, Nvidia has already requested that Taiwan Semiconductor begin manufacturing additional chips, with production work expected to kick off in the second quarter of 2026.
This is the kind of supply crunch that tests even the most sophisticated semiconductor supply chains, and it's happening against a backdrop of regulatory uncertainty around U.S. chip exports to China.
ByteDance Goes All In
One reason for the demand surge? TikTok's parent company ByteDance is planning a staggering spending spree. The company intends to allocate roughly 100 billion yuan, or about $14 billion, to purchase Nvidia chips in 2026 alone.
Nvidia has priced its China-bound H200 variants at approximately $27,000 per chip, though actual pricing varies depending on order volume and customer terms. An eight-chip module runs around 1.5 million yuan, up from the previous H20 module's roughly 1.2 million yuan price tag.
Despite the higher cost, Chinese buyers see the deal as attractive given the significant performance improvements the H200 delivers over earlier generations. When you're racing to build competitive AI systems, a 25% price bump for meaningfully better hardware makes sense.
Wall Street Remains Convinced
The China demand story hasn't shaken Wall Street's confidence in Nvidia. Nvidia continues to draw strong analyst support, with Bank of America Securities analyst Vivek Arya maintaining his bullish stance after a recent investor meeting. Arya called Nvidia his top pick in the semiconductor space.
His reasoning? Nvidia holds a full-generation advantage in artificial intelligence hardware. Today's large language models are still being trained on the company's Hopper GPUs, and the upcoming Blackwell systems promise a 10x to 15x performance jump when they arrive in early 2026.
Arya noted that Nvidia has visibility into at least $500 billion in cumulative sales spanning 2025 and 2026. While uncertainty lingers around potential H200 GPU exports to China under evolving U.S. trade policy, he said it's premature to assess the full impact. For now, Nvidia's mid-70% gross margin outlook remains intact.
The company's momentum has been extraordinary. Last October, Nvidia became the first company ever to surpass a $4.5 trillion market capitalization, leaping past tech titans like Apple Inc. (AAPL) and Microsoft Corp. (MSFT).
Nvidia shares were trading down 0.31% at $186.95 during premarket trading on Wednesday.