CryptoWatchMay2025

Expert weighs in as U.S. vs. China Al race hits full steam

The U.S.-China race for artificial intelligence (AI) leadership is accelerating, with new restrictions, market bifurcation, and national champions reshaping the global semiconductor landscape.
In a recent discussion hosted by BofA Securities, Gregory C. Allen, Director at the Wadhwani AI Center at CSIS, warned that China’s AI development has reached a point where "China AI is now too far advanced for the U.S. to fully restrict its aspirations.”
According to Allen, China has successfully obtained advanced chips—such as Nvidia’s H100 and H800—as well as semiconductor manufacturing equipment over the past few years.
These gains were achieved through manufacturing at Taiwan Semiconductor Manufacturing (NYSE:TSM) using shell companies and acquiring equipment for SMIC, a foundry over which Huawei holds significant influence.
While these methods have helped Huawei become the leading domestic player in China’s AI chip space, the company still lags behind globally. Its hardware performance is estimated at only 70–100% of Nvidia’s H100, with power efficiency trailing even further.
The software and ecosystem side is “the furthest behind,” BofA notes, with AI software performance in the West said to be improving tenfold each year.
New restrictions under the AI Diffusion rule are expected to take effect on May 15, barring any reversal by the Trump administration.
Allen views implementation as likely, with the impact on Nvidia (NASDAQ:NVDA) estimated at 5–10% of its sovereign sales, including business currently billed through Singapore.
“In general, Mr. Allen notes that >50% of global data center capex has already been spent within the U.S., and the rules may just be an extension of historical investment patterns,” BofA analysts led by Vivek Arya said. “However, for NVDA, we highlight the rule may put up to 5-10% of sovereign sales,” they noted.
BofA expects the hawkish stance on China’s technology sector to continue, particularly under a Trump administration.
That includes maintaining the current bans on Nvidia’s H20 and AMD’s MI308 chips, as well as potentially expanding restrictions on semiconductor equipment exports from the U.S., Europe, and Japan.
While these developments pose near-term headwinds for U.S. semiconductor firms with exposure to China, BofA views the Chinese AI sector as forming a distinct total addressable market (TAM), with limited access for American vendors.
At the same time, global capital allocation into AI—including frontier models, robotics, and autonomous vehicles—continues.
BofA’s preferred names in the space include Nvidia and Broadcom (NASDAQ:AVGO), along with Marvell (NASDAQ:MRVL), Coherent (NYSE:COHR), and MACOM Technology Solutions among the smaller players.
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