China was already "developing a fully domestic stack" either way.

So the only thing selling to them accomplishes is give Nvidia more margins. At the cost of boosting the Chinese AI sector - possibly to the point of parity.

China at the moment has the capability to do infrastructural rollouts far faster than US or Europe, but doesn't have the chips to stuff new datacenters with. So it's easy to see why China would want the chips. But it's not like Nvidia is having trouble selling their AI accelerators outside China - and they can't ramp up accelerator production on demand. More demand for accelerators would push the prices even higher, and that would reflect in the margins, but the benefits for Nvidia weren't even that large.

So it was a questionable push all around - even before the spy scandal.