China Gives Nvidia the Green Light: What's Behind the Chip Rally?

Three numbers tell today's story: ASML up 5%, SK Hynix closing 5% higher, and Nvidia gaining ground after China quietly approved something worth $8 billion in potential sales.

The semiconductor sector is having a moment, and it's not just about one company or one country. It's about a fundamental shift in how the world's most critical technology supply chain operates.

The Approvals That Changed Everything

China has given domestic tech giants ByteDance, Alibaba, and Tencent the green light to purchase Nvidia's H200 systems, according to Reuters. This marks a significant pivot from Beijing's earlier push for companies to buy domestic alternatives instead of American chips.

The timing matters. Back in May, Nvidia warned that U.S. export restrictions to China would cost the company $8 billion in lost sales. Now, with Chinese approval in hand, those billions are back on the table. The H200 isn't just any chip—it's Nvidia's latest AI powerhouse, designed for the kind of large-scale computing that drives everything from social media algorithms to autonomous vehicles.

But this isn't happening in isolation. The approval comes as the broader semiconductor industry reports some of its strongest numbers in years.

When Numbers Tell a Story

ASML, the Dutch company that makes the machines that make the world's most advanced chips, reported €13.2 billion worth of bookings in the fourth quarter—well above analyst expectations. Their 2026 sales forecast also beat estimates, signaling that chipmakers worldwide are planning major production expansions.

Meanwhile, South Korea's SK Hynix posted record full-year profits for 2025, riding a wave of memory chip shortages that have sent prices soaring. The company benefits from a perfect storm: unprecedented demand for memory chips needed in AI data centers, combined with supply constraints that have created pricing power not seen in years.

These aren't just good quarterly results. They're indicators of a structural shift in how the world consumes computing power. Memory chips, once commoditized components, have become strategic assets as AI applications demand exponentially more storage and processing capacity.

The Geopolitics of Silicon

The Chinese approval of Nvidia sales reveals something fascinating about modern tech geopolitics. Despite years of trade tensions and export restrictions, pragmatism often wins over ideology when it comes to critical technology.

China's tech giants need the best AI chips available to compete globally. ByteDance's TikTok algorithm, Alibaba's cloud services, and Tencent's gaming platforms all require cutting-edge processing power. Forcing these companies to use less capable domestic alternatives could handicap them in international markets.

From Nvidia's perspective, China represents roughly 20% of global semiconductor demand. Losing that market permanently would force the company to find growth elsewhere—a challenging proposition given China's scale and appetite for AI infrastructure.

The approval suggests both sides recognize their mutual dependence, even amid broader strategic competition.