Alleged AI chip smuggling to China leads to US calls for chip tracking

The U.S. Justice Department has charged four people in a scheme to illegally export Nvidia AI chips to China, prompting a key House Republican to call for urgent passage of a chip-tracking bill on Thursday.

AI Brief

US charges two Americans and two Chinese nationals for smuggling Nvidia GPUs to China using fake contracts and third-country routes.
The Chip Security Act seeks tighter controls on chip exports and mandatory reporting to prevent diversion to China.
Washington aims to maintain tech dominance while China accelerates efforts to catch up in AI innovation.

"China recognizes the superiority of American AI innovation and will do whatever it must to catch up," said John Moolenaar, the chair of the U.S. House Select Committee on China. "That's why the bipartisan Chip Security Act is urgently needed."

The legislation, which Moolenaar introduced in May and has 30 cosponsors, would require location verification for chips, make it mandatory for chipmakers to report and share information about potential diversion, and look at additional ways to stop U.S. chips from ending up in the wrong hands.

The case highlights the challenges Washington faces in enforcing its sweeping restrictions on high-tech exports to China, which are designed to hobble Beijing's military development and keep the U.S. ahead on technology. China has criticized U.S. export curbs as part of a campaign to weaponize economic and trade issues.

The indictment, which the U.S. Department of Justice announced on Thursday, charges two U.S. citizens and two Chinese nationals with conspiring to export Nvidia GPUs to China without required licenses. The defendants allegedly created fake contracts and provided false documentation to ship the chips to third countries, knowing they were destined for China.

They then exported 400 Nvidia A100 GPUs to China through Malaysia between October 2024 and January 2025, according to the indictment. Law enforcement stopped attempts to export 10 Hewlett-Packard supercomputers with Nvidia H100 GPUs and 50 separate Nvidia H200 GPUs through Thailand, the U.S. Department of Justice said.

In the Florida case, the conspiracy included the use of a Tampa company as a front to purchase and export chips, and nearly $4 million in wire transfers from China to fund the scheme, the Justice Department said.

A lawyer for one defendant declined to comment and a lawyer for a second defendant did not immediately respond to a request for comment. The other defendants could not immediately be reached.