Nvidia has strongly criticized the use of unauthorized AI chips in China, stating that assembling data centers using these smuggled products is a “losing proposition.” This statement follows a Financial Times report claiming that at least $1 billion worth of Nvidia’s AI chips were illegally brought into China.
A spokesperson for Nvidia told CNBC,
“Trying to cobble together datacenters from smuggled products is a losing proposition, both technically and economically. Datacenters require service and support, which we provide only to authorized NVIDIA products.”
Nvidia’s B200 chips are banned for sale to China. Despite this, they have surfaced on the black market. The Financial Times reports that Chinese distributors started selling them in May. These chips were supplied to data centers serving local AI firms.
The illegal imports occurred during Donald Trump’s stricter export restrictions. Those restrictions mainly targeted Nvidia’s H20 chips.
China has remained a key player in the AI technology race and a significant market for chipmakers. However, the U.S. government has imposed heavy restrictions on advanced processor exports, citing national security risks. These limitations have made it challenging for American companies like Nvidia to continue business as usual in the region.
Earlier this year, the U.S. halted sales of the H20 chips by requiring Nvidia to secure a special license. These chips were initially developed as a workaround to comply with earlier export restrictions.
Despite the regulatory roadblocks, Nvidia CEO Jensen Huang recently indicated a breakthrough with U.S. authorities. He announced that the company would soon resume sales of H20 chips to China, signaling a potential easing of tensions.
Huang also expressed his interest in offering more advanced chips than the H20 to the Chinese market, though such moves would likely remain subject to future regulatory approval.