$1B worth of NVIDIA's restricted chips smuggled into China: Report
What's the story
Over $1 billion worth of NVIDIA's restricted artificial intelligence (AI) chips have been smuggled into China between April and June this year, a Financial Times report has revealed. The illicit trade began after the Trump administration tightened chip exports further. Documents reviewed by the publication show that Chinese distributors started selling NVIDIA's restricted B200 chip to data centers catering to Chinese AI groups in May.
Black market demand
B200 chip widely available on China's black market
The Financial Times' investigation found that NVIDIA's B200 chip is the most sought-after and widely available chip on China's black market for American chips. However, there was no evidence to suggest that NVIDIA was involved in the sale of these smuggled chips. "Trying to cobble together data centers from smuggled products is a losing proposition, both technically and economically," an NVIDIA spokesperson told FT.
Smuggling operations
One firm sold $400 million worth of banned chips
An Anhui-based company has emerged as one of the biggest sellers of NVIDIA's B200 chip. The firm allegedly included these restricted chips in "ready-built racks" for $489,000 per rack. Since mid-May, nearly $400 million worth of such racks have been sold by this business and its affiliates. While these B200 racks were found to be originally from American assembler Supermicro, there is no evidence that the latter was involved in any smuggling in China.
Strategic moves
US allows sales of H20 chips to China
On July 14, NVIDIA announced that the Trump administration would allow it to continue selling its H20 AI chips to China. The H20 was supposed to be NVIDIA's big workaround for restrictions on sales of powerful AI hardware to China. After the US tightened export rules last year, NVIDIA launched this lower-spec version of its flagship GPU designed to fall just under those limits.
Illegal trade
Black market for banned chips has already taken root
Despite the US government's deliberations on easing chip export restrictions to China, a black market for these products has flourished. Research from the Center for a New American Security (CNAS) estimates that between 10,000 and several hundred thousand banned NVIDIA chips may have been smuggled to China in 2024 alone. Chinese firms are already planning to install over 115,000 restricted NVIDIA AI chips in some three dozen data centers across China's western deserts.
Evolving tactics
Smugglers have become more sophisticated
The smuggling operation appears to be sophisticated and widespread. One smuggler reportedly handled an order worth $120 million for servers containing 2,400 banned NVIDIA H100s destined for China. Huang has consistently maintained there's "no evidence of any AI chip diversion," arguing that the massive servers are "nearly two tons" and easy to track. However, Commerce Under Secretary Jeffrey Kessler directly contradicted those claims saying "It's happening."
Transport tactics
Distributors use a complex web of shell companies, intermediaries
The smuggling networks have become increasingly sophisticated, with over 70 distributors openly marketing restricted processors as of this month. They use a complex web of shell companies, third-party resellers, and intermediaries across Southeast Asia to move the chips. Malaysia has emerged as a particular concern, with imports of advanced GPUs surging over 3,400% in early 2025. Authorities have said they "will not tolerate the misuse of Malaysia's jurisdiction for illicit trading activities."