The U.S. Department of Justice (DOJ) said Tuesday that two Chinese citizens were arrested for being involved in illegally shipping tens of millions of dollars of high-performance AI chips to China.
The DOJ said Chuan Geng and Shiwei Yang were arrested in California on August 2 and accused of violating the Export Control Reform Act.
Through California-based company Alx Solutions, Geng and Yang are accused of knowing “sensitive technologies” from the US to China, including GPUs, and are accused of deliberately shipping them.
DOJ didn’t name the company that Chips Alx Solutions allegedly smuggled, but cited the complaint, saying that the chip is “the most powerful chip on the market” and “designed specifically for AI applications.” That explanation could have resulted in the chips being smuggled by Nvidia. A report by Reuters specifically named Nvidia’s H100 GPUs being shipped.
A review of the export document by DOJ found that ALX Solutions sent chips and other technologies to shipping and freight carriers in Singapore and Malaysia, but received payments from entities in Hong Kong and China in return. The department also found a record of communications regarding shipping technology to Malaysia.
“This incident shows that smuggling is a non-starter,” an Nvidia spokesperson said in a statement. “We sell our products to well-known partners, primarily OEMs. OEMs ensure that all sales comply with US export control rules. Even relatively small exporters and freight are subject to thorough review and scrutiny, and repurposed products have no service, support or updates.”
The news recognizes many in the West as a major threat to the AI race as the US is trying to find a way to promote global AI innovation and balance it with impose export restrictions on China. The Trump administration’s recently announced AI action plan reduced the importance of having strong export restrictions, but was light in detail.
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One potential solution to the recent proposed reduction in chip smuggling is to implement technology on chips to acquire smuggling tracking techniques, but chip makers are highly opposed to such a move.
In a blog post Tuesday, Nvidia said the GPU does not include kill switches or backdoors, claiming that building on such a tool would only undermine security.
“Nvidia has been designing processors for over 30 years. Embedded backdoors and killing switches on chips will be a gift for hackers and hostile actors,” the company writes. “It undermines global digital infrastructure and breaks trust in US technology. Established laws wisely require businesses to fix their vulnerabilities.
“It’s not a sound policy. It’s an overreaction that irreparably harms America’s economic and national security interests,” Nvidia writes.
Nvidia did not immediately return requests for additional comment.
For more information on the tumultuous years of the semiconductor industry up until now, we have a timeline of market news that has been updated regularly since the beginning of 2025.
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