Software ecosystem aside, their hardware is inferior to NVDA/TSMC's and will remain so. And even if it wasn't, China just doesn't have the fab capacity to both meet domestic demand and export enough to hurt demand for NVDA.
They're behind, but they're catching up pretty quickly. I wouldn't bet against Chinese companies dominating this market in the medium to long term.
Nvidia could easily end up being the Tesla vs Huawei as BYD.