Over $1billion worth of Nvidia chips smuggled into China despite US export ban: Report

More than $1 billion worth of Nvidia’s most powerful AI chips were illegally smuggled into China between April and June 2025, according to a Financial Times investigation. The chips in question include Nvidia’s most advanced models: B200, H100, and H200, which are banned from export to China under US trade restrictions aimed at slowing Beijing’s AI progress.

Secret Supply Routes Through Southeast Asia

According to a report by the Financial Times, the chips were routed through Southeast Asia and sold through grey-market networks in Chinese provinces including Guangdong, Zhejiang, and Anhui. Some distributors, such as Shanghai-based "Gate of the Era", reportedly handled nearly $400 million worth of B200 systems, selling pre-assembled AI server racks for as much as $500,000 each, a significant markup over US retail prices.

Nvidia Responds: “No Evidence of Diversion”

Responding to the reports, Nvidia told Reuters that there is no evidence its chips were diverted from authorised sales channels. The company emphasised that any unauthorised chips in circulation would lack official software support and may not operate efficiently within AI data centres.

Underground Chip Repair Industry Thrives

With black-market sales booming, a parallel ecosystem has emerged in China. Reuters found that unauthorised repair shops in Shenzhen are now servicing these banned Nvidia chips, charging between ¥10,000 and ¥20,000 per unit. Some repair firms claimed they handle up to 500 chips per month, many of which were smuggled or sourced from unregulated channels.

US Mulls New Controls, Lawmakers Push Back

The US Commerce Department has so far refrained from commenting on the findings of the FT report, but officials are reportedly reviewing enforcement options, including stricter scrutiny of transshipment hubs and firmware-based tracking mechanisms to curb unauthorised diversion.

Lawmakers in the US have also begun pushing for new legislation aimed at increasing transparency in semiconductor exports. This includes proposals to embed tracking systems in chips or require post-sale usage disclosures.

H20 Approved, B200 Still Banned

Ironically, the smuggling surge comes just weeks after the US reversed restrictions on Nvidia’s less powerful H20 chip, allowing American firms to resume certain shipments to China. However, the more advanced B200 and H100 models remain under full export control and are at the heart of the black-market trade.

Enforcement Lags Behind Rapid AI Race

The situation underscores the growing challenge facing regulators attempting to police a rapidly evolving AI arms race. With China's demand for advanced computing accelerating and enforcement gaps widening, the battle over chip access is far from over.