Carbon fiber velvet material provides exceptional sputtering resistance properties exceeding those for graphite and carbon composite materials. A 2 kW Hall thruster with segmented electrodes made of this material was operated in the discharge voltage range of 200-700 V. The arcing between the floating velvet electrodes and the plasma was visually observed, especially, during the initial conditioning time, which lasted for about 1 h. The comparison of voltage versus current and plume characteristics of the Hall thruster with and without segmented electrodes indicates that the magnetic insulation of the segmented thruster improves with the discharge voltage at a fixed magnetic field. The observations reported here also extend the regimes wherein the segmented Hall thruster can have a narrower plume than that of the conventional nonsegmented thruster.