Nvidia AI Chips Smuggled to China Amid US Restrictions – Report

Nvidia's AI Chips in the Chinese Black Market

Nvidia, a leading manufacturer of artificial intelligence (AI) chips, has reportedly shipped high-value AI chips worth approximately $1 billion to China within three months after U.S. President Donald Trump imposed stricter export controls on semiconductors. According to a report, these shipments involved the B200 chip, which is officially banned for sale in China.

An analysis of sales contracts, company filings, and insights from individuals familiar with the deals revealed that the B200 has become highly sought after in the Chinese black market for U.S. semiconductors. This development raises concerns about the effectiveness of export restrictions and the potential for unauthorized distribution of restricted technology.

Nvidia has emphasized that it only provides service and support for its authorized products, stating that attempting to build datacenters using smuggled chips is both technically and economically unfeasible. The company’s spokesperson noted this in an email to Seeking Alpha, highlighting the challenges associated with unauthorized hardware.

In May, several Chinese distributors began selling B200s to suppliers of data centers serving AI groups based in China. This activity occurred shortly after the Trump administration implemented measures to restrict the sale of Nvidia's H20 chip, a less powerful version designed to comply with current export controls.

Although it is legal to acquire and sell restricted Nvidia chips in China if appropriate border tariffs are paid, entities involved in such transactions would be violating U.S. regulations. Lawyers with knowledge of the rules have confirmed this, emphasizing the legal risks involved.

Recent statements by Nvidia CEO Jensen Huang indicate that the company plans to increase the supply of Chinese-compliant H20 chips in the coming months. He also mentioned exploring the possibility of bringing more advanced semiconductors to the country. However, no purchase orders have been fulfilled yet, as the company awaits approval of export licenses from the U.S. government.

Huang's comments followed a statement from Nvidia expressing hope to resume sales of its H20 GPUs to Chinese clients, citing assurances from the U.S. government regarding the granting of export licenses. U.S. Commerce Secretary Howard Lutnick described this move as part of negotiations on rare earth minerals.

Despite being designed to bypass export restrictions, the sale of H20 chips was halted in April. In the subsequent three months, Chinese distributors from provinces like Guangdong, Zhejiang, and Anhui sold Nvidia’s B200s, along with other restricted processors like H100 and H200. The total sales during this period were estimated at around $1 billion.

Nvidia has maintained that there is no evidence of any AI chip diversion, asserting that it has no knowledge of its restricted products being sold to China. One of the largest sellers of B200s is an Anhui-based company known as "Gate of the Era." According to documents seen by the Financial Times, this company has been actively selling B200 racks, each containing eight B200s and other necessary components.

The market price for these racks has decreased slightly, ranging between RMB 3 million to RMB 3.5 million (about $489,000) per rack. Gate of the Era reportedly received at least two shipments of a few hundred B200 racks each and sold them directly or through secondary distributors. The company is expected to have sold nearly $400 million worth of such products.

Gate of the Era lists China Century, an AI solution provider, as its largest shareholder. Based in Shanghai, China Century claims to have a lab in Silicon Valley and a supply chain center in Singapore. However, when approached by the Financial Times, China Century denied procuring Nvidia's chips and stated it does not engage in any related business, focusing instead on smart city projects.

The B200 racks sold by Gate of the Era and other Chinese distributors originated from Super Micro Computer, an American company. Although there is no indication that Super Micro is involved in or aware of the smuggling, the company has stated it complies with all U.S. export control requirements.

Some Chinese distributors have begun advertising future stock of B300s, the next generation of Nvidia's B200, which is expected to enter mass production later this year. This trend highlights the ongoing demand for advanced AI chips in China despite export restrictions.

Other restricted Nvidia chips, including H200, H100, and 5090, are also being advertised on Chinese social media platforms such as Douyin and Xiaohongshu. Packaging and installation images and videos show logos of companies like Super Micro, Dell, and Asus, who assemble Nvidia’s chips into servers. There is no suggestion that these companies are aware of the social media advertising or their products being sold in China.

Dell and Asus have stated they maintain strict compliance with all laws and regulations, including U.S. export controls, and take action against partners who fail to meet these standards. Neither company responded immediately to a request for comment from Seeking Alpha.