Nvidia AI Chips Smuggled into China Amid Export Controls

After the Trump administration tightened chip export controls, it appears that Nvidia’s advanced AI processors, valued at over $1 billion, have been smuggled into China within just three months.

Despite the administration’s efforts to limit China’s technological growth by imposing stricter export controls, a thriving black market for U.S. semiconductors has emerged. This has made Nvidia’s B200 chips among the most desired processors readily available in China.

According to analyses based on numerous sales contracts, company applications, and interviews with involved parties, it’s been found that Chinese distributors sold AI chips worth $1 billion in the three months following the implementation of these controls. This includes models like the B200, H100, and H200.

Distributors located in Guangdong, Zhijiang, and Anhui Provinces facilitated these transactions by offering chips in pre-assembled racks containing eight B200 units alongside essential components and software. Prices for these setups currently range from 3 million to 3.5 million yuan (approximately $489,000), showing a 50% markup compared to similar offerings in the U.S.

Technically, it’s legal to sell and receive restricted Nvidia chips in China as long as relevant tariffs are paid. However, those involved in sending these chips to China are breaking U.S. regulations. Nvidia claims they have found no evidence of AI chip conversions and stated they are not connected to the sales of these restricted products to China.

The demand for B200 chips is driven by their performance, affordability, and relatively easier maintenance compared to more complex options. Major AI firms in China that operate globally find it hard to legally order these chips, install them in their data centers, or access Nvidia’s customer support. Consequently, third-party data centers have stepped in as significant buyers, supplying computing services to various small businesses in sectors like tech, finance, and healthcare that may not have stringent compliance needs.

There’s been speculation that smuggled Nvidia chips might be powering China’s notable Deepseek AI. However, this claim is facing skepticism, particularly from industry leaders like Ai CEO Alexandr Wang. He asserts that Deepseek is secretly utilizing Nvidia’s high-caliber H100 chips, even though U.S. export restrictions should limit their availability to China. This has ignited a vigorous debate regarding the future of AI and the influence of U.S. regulations on global technology.

Wang claims that Deepseek currently operates around 50,000 Nvidia H100 GPUs, which seems substantial given the current export constraints. He also mentioned that their employees are not allowed to speak publicly about using these chips due to U.S. regulations. When a clip of Wang’s comments surfaced on social media, Elon Musk expressed agreement, adding another layer to the discussion.

Experts indicate that Southeast Asian countries are now becoming major avenues for Chinese groups seeking these restricted chips, leading to discussions within the U.S. Department of Commerce to encourage nations like Thailand to enhance their export controls on advanced AI products. Malaysia has also tightened its export regulations concerning shipments of advanced AI chips, particularly towards China.

Though these measures are being implemented, officials in China believe that new channels will be developed for transporting these chips, with supplies already beginning to flow through European nations not on the restriction list. The possibility of stricter export regulations in Southeast Asia is causing buyers to rush orders before such rules take effect.

Overall, the emergence of a black market for semiconductors in China highlights the limitations of Washington’s attempts to suppress Beijing’s technological aspirations. While export controls have succeeded in hindering major Chinese AI companies from legally acquiring and using restricted chips, the demand for cutting-edge technology continues to thrive, prompting risk-taking intermediaries to step in and fulfill that demand.