US officials question Nvidia over China chip smuggling

Nvidia's ↗ 1.92% AI chips are still reaching China despite US export curbs, and US officials want to know why the company missed warning signs, according to a Bloomberg investigation published Oct. 1. The cases it examines include a seized mansion in Singapore and servers intercepted in Taiwan. Nvidia has not been accused of breaking export controls or of knowingly helping smugglers, and it says it follows the rules.bloomberg+1

Bloomberg reported that US authorities believe China has smuggled in computing power equal to more than 115,000 Nvidia AI chips. Research firm SemiAnalysis estimates the number that slipped past controls is in the hundreds of thousands.edaily

Hair dryers, mansions and diverted servers

The picture most associated with the trade comes from a surveillance photo US prosecutors released in March. It shows a woman in a Southeast Asian warehouse using a red hair dryer to peel serial-number stickers off server packages. In that case, Supermicro co-founder Wally Liao and two others are accused of selling \$2.5 billion of servers to a Southeast Asian company that sent them on to Chinese buyers. Liao has pleaded not guilty, and his trial is set for next March.news.bloomberglaw+1

In Taiwan, prosecutors say infrastructure firm Flying Tiger ordered 130 servers with Nvidia Blackwell chips and moved 74 of them to China through Japan and Indonesia. The coast guard seized the other 56. Prosecutors named an Nvidia manager, identified only by the surname Chang, as the "key figure" who approved the release of the B300 processors. In Singapore, authorities seized a mansion in July that they suspect was bought with smuggling proceeds.edaily+1

Critics say some of the warning signs were obvious. The space Flying Tiger rented was too small for the servers it ordered. The Thai buyer in the Liao case would have needed more than 100 megawatts of data-center capacity, while all of Thailand had only a few hundred megawatts in operation at the time.edaily

Nvidia: "a nonstarter"

"Smuggling is a nonstarter," Nvidia told Bloomberg. The company said it sells mainly to well-known partners, and that its own checks have helped flag attempts to get around the rules, leading to federal prosecutions. Bloomberg reported that Nvidia has dropped more than half of its previously approved Asian AI-chip buyers under a stricter whitelist.aiweekly

A spokesperson said the smuggling uncovered so far is "a drop in the bucket" next to China's computing resources, and that the volume prosecutors allege amounts to less than 0.5% of Nvidia's products.edaily

Enforcement under strain

The Commerce Department's Bureau of Industry and Security had about 10 enforcement staff overseas until a budget increase this year. Critics also link weaker enforcement to CEO Jensen Huang's lobbying, which led President Trump last December to allow sales of older Hopper chips to China.edaily

This week, federal prosecutors in Los Angeles charged Earthmade Computer owner Greg Lui with smuggling about \$300 million of Nvidia servers to China. Meanwhile, brokers are reportedly shifting to routes through Europe and the Middle East. "It's the worst game of whack-a-mole we've ever played," one US official said.aiweekly+1