Nvidia Under Scrutiny for Chip Exports to China

(Reuters) – The U.S. Department of Commerce has recently asked Nvidia (NASDAQ: NVDA) to investigate how its products reached China over the past year, according to a report from The Information.

The chip giant has requested major distributors such as Super Micro Computer (NASDAQ: SMCI) and Dell Technologies (NYSE: DELL) to perform spot checks on their customers in Southeast Asia. Nvidia's artificial intelligence chips are integrated into server products from Super Micro and Dell.

The report states that five different individuals involved in the smuggling of Nvidia chips claimed to have successfully evaded detection during recent inspections by Super Micro.

"We insist that our customers and partners strictly adhere to all export control restrictions. Any unauthorized deviation of previously-owned products, including any grey market resales, would be a burden on our business, not a benefit," stated an Nvidia spokesperson via email.

According to a source close to Super Micro, some customers duplicated the serial numbers of servers containing Nvidia chips purchased from Super Micro and affixed them to other servers they accessed. In some instances, smugglers even altered the serial numbers in the operating system of the servers.

Dell reported that the company mandates its distributors and resellers to comply with all applicable regulations and export controls, noting that it would take appropriate action, including terminating relationships, if partners fail to adhere to these obligations.

Super Micro and the Commerce Department did not respond immediately to requests for comment from Reuters.

The Biden administration has intensified its chip crackdown in China, broadening a ban on the sale of high-end AI chips to the country last year. Nevertheless, several Chinese universities and research institutes have managed to procure Nvidia chips via resellers, as revealed in a Reuters review of tender documents earlier in 2024.

Earlier this month, the U.S. limited semiconductor exports to 140 companies, including chip equipment manufacturers.