The U.S. has given the green light for Nvidia to reenter the China AI chip market, but the Chinese government is flashing a red light.

Chinese authorities have urged companies to avoid using Nvidia's H20 chips for government purposes, possibly affecting Nvidia's China market. Despite U.S. lifting a sales ban, Beijing questions tech firms on their H20 chip purchases amid security concerns.

The Chinese government has advised local companies against using Nvidia’s H20 chips, adding another hurdle to the chipmaker’s recovery plans in China. According to sources, local firms received directives cautioning against the use of H20s in government or national security-related work across state and private sectors.