$1 billion in banned Nvidia AI chips smuggled into China, report reveals

Despite stringent US export controls aimed at curbing China's access to advanced artificial intelligence capabilities, a new report by the Financial Times reveals that at least $1 billion worth of high-end Nvidia AI chips have entered China in the three months following Washington's intensified restrictions.

The findings highlight the formidable challenge faced by the US in enforcing its technology sanctions and the flourishing black market for advanced semiconductors.

The FT investigation cites sales contracts, company filings, and direct accounts from individuals involved in these illicit deals. It details how Nvidia's top-tier B200 processors, which are explicitly banned for sale in China, are readily available on a thriving black market. Other restricted models, including the H100 and H200, have also found their way into the country.

Chinese distributors, primarily from Guangdong, Zhejiang, and Anhui provinces, reportedly began selling these banned chips as early as May, supplying data centers that serve various Chinese AI groups.

The report likens the bustling underground market to a "seafood market," indicating a robust supply and demand for these crucial components. Some sellers are even openly advertising the chips, and pre-orders for Nvidia's yet-to-be-launched B300 model are reportedly being taken.

Responding to the report, Nvidia said that building data centers with smuggled products is "inefficient both technically and financially," as the company only offers service and support for authorized products.

The chipmaker maintains it has "no evidence of any AI chip diversion" from its official channels. However, the sheer volume of chips reportedly entering China suggests a sophisticated network of intermediaries and transshipment points.

Southeast Asian countries, particularly Thailand and Malaysia, have emerged as key hubs where Chinese entities acquire these restricted chips. In response, the US Commerce Department is reportedly considering expanding export controls to include advanced AI chip sales to these nations as early as September.

The influx of these powerful chips into China, despite the export ban, underscores the immense demand within the country as it pushes to advance its own AI capabilities. Chinese operators have reportedly sought to import as many as 115,000 banned Nvidia chips to fuel their AI development efforts.

A standard rack of eight Nvidia B200 AI chips is reportedly going for $420,000 and $490,000, a significant markup over US prices. The lucrative nature of this illicit trade appears to be a strong motivator for smugglers.

This report comes just weeks after the Trump administration reportedly reversed an earlier export restriction on Nvidia's less powerful H20 chip, allowing some sales to resume in China. However, the more advanced B200 and H100 models remain under strict export control, making their presence in the Chinese market particularly concerning for US policymakers.