Nvidia Investigates AI Chip Exports to China

Investing.com — According to a report from The Information on Thursday, Nvidia (NASDAQ: NVDA) has turned to companies such as Super Micro Computer (NASDAQ: SMCI) in a bid to work out how its advanced artificial intelligence chips are finding their way to China in violation of U.S. export laws.

The publication said Nvidia, which typically doesn't sell its chips directly to customers and relies on specialized dealers and server companies like Supermicro, recently asked Supermicro to perform spot checks of its customers in Southeast Asia.

The region is said to be seen as a hot spot for chip smuggling to China. The checks are designed to verify that those customers still possess the servers equipped with Nvidia chips they bought, said The Information, citing a person close to the U.S. Department of Commerce, which is responsible for enforcing U.S. trade laws.

The Information adds that a person close to Supermicro told them some of the company's customers have utilized "crafty tricks" that make it difficult to figure out if they have illegally resold Nvidia's chips to customers in China, such as duplicating the serial numbers of the servers with Nvidia chips purchased from SMCI and attaching them to other servers they had access to.

Supermicro's checks are said to have come after the Commerce Department recently requested Nvidia investigate how the company's products are being smuggled into China over the past year.

Nvidia has also reportedly asked Dell (NYSE: DELL) to audit its customers in Southeast Asia for the same reason.

The Information adds that the inspections are continuing. However, they note that "five different people involved in smuggling Nvidia chips said they have managed so far to evade detection during recent inspections by Supermicro."