How Nvidia Is Fighting Back Against Export Controls  ## Metadata - Author: [[Hard Fork AI]] - Full Title: How Nvidia Is Fighting Back Against Export Controls - Category: #podcasts - URL: https://share.snipd.com/episode/1fd8f845-4a96-4326-ba4f-478f19546a42 ## Document Notes ## Highlights - **High-Value GPU Smuggling Arrests** - Two people were just arrested for smuggling AI chips to China and the rumors basically point to the fact that these were NVIDIA chips. - They are accused of willfully shipping sensitive technologies and violating the Export Control Reform Act. Transcript: Jaeden Schafer Two people were just arrested for smuggling AI chips to China and the rumors basically point to the fact that these were NVIDIA chips. There is a whole bunch of drama. People are asking NVIDIA to put kill switches and backdoors in their chips. NVIDIA has responded. The White House is weighing in. This is quite a crazy story and builds on a lot of precedent that's been going over the last few years with chip sacks and basically the quote unquote AI race that the US says they're in With China right now. So we're going to be diving into all of that on the podcast. Before we do, I wanted to mention, if you want to try any of the AI models that I talk about on the show, I'd love for you to go check out my own startup, which is AIbox.ai. You basically get access to the top 40 AI models, from OpenAI, Anthropic, Coher, DeepSeek, Google, Meta, tons of others, audio models from 11 Labs, tons of interesting new image generation Models, all for 20 bucks a month on one platform. The cool thing about it is you can actually chat and switch what model you're talking to in the same conversation. So you can ask a question and have OpenAI respond and then just regenerate the response with Claude and DeepSeek and Meta and Google and see which one gives you the best response. Tons of cool features. I'd love to hear what you have to say about it. We're actively adding new features all the time. So this is a project I have been working on. I'm really excited about. You can go check it out. There's a link in the description to AIbox.ai. All right, let's get into the smuggling world of AI chips. So two people were arrested. The Department of Justice in the United States has basically said that these were two Chinese nationals and they were shipping, basically, they were involved in shipping tens of millions Of dollars worth of high-performance AI chips to China. So this isn't a small amount of money. This is quite, you know, we're talking probably like $50 million of these AI chips. So a lot of money. And again, we know companies spend billions on this. So it's, I guess, not an insane amount. But what I would say is probably that these aren't the only two people in all of America that were smuggling chips or in all of the world that were smuggling chips. There's a lot of drama in the past about Singapore being the third biggest purchaser of AI chips from NVIDIA. And NVIDIA basically saying no, and people saying, look, Singapore buys them, and that's just really shell companies smuggling them to China. And NVIDIA is like, no, no. That's just the offices of a lot of Asian companies are set up in Singapore. That's where we take the payments from. But really, they're going to other countries. And we're complying with all the rules. So there's a lot of drama, to say the least, around this. But this is, I think, one of the big events that has happened on U.S. Soil. So this is Chung Gang and Shi Wei Yang. Both of them were arrested in California. ([Time 0:00:00](https://share.snipd.com/snip/70b47efb-cbd5-4770-8e68-ac7e54ee4726)) - **DOJ Hints At H100 Without Naming It** - The DOJ described the devices as "the most powerful chip in the market," implicitly pointing to NVIDIA's H100 without naming it. - That phrasing, plus NVIDIA's market dominance, makes attribution obvious even when the company isn't named. Transcript: Jaeden Schafer The DOJ, interestingly enough, didn't say what chips were actually being shipped, but they did say that they were shipping, quote, the most powerful chip in the market. So basically, this is an NVIDIA chip. Since NVIDIA dominates this entire market, it's kind of funny, they didn't want to call it NVIDIA, maybe they're being nice. And they said that it was, quote, designed specifically for AI applications. Yeah. So it's basically that means that it's going to be probably NVIDIA's H100 GPUs. And routers actually reported and specifically said that that was what got shipped. ([Time 0:03:18](https://share.snipd.com/snip/ba52511b-be44-4317-a1a9-d55fb98196a8)) - **Routing Through Third Countries** - Shipments moved through Singapore and Malaysia while payments came from Hong Kong and China, indicating deliberate export-evasion routing. - Prosecutors uncovered communications explicitly saying Malaysia was used to skirt US export restrictions. Transcript: Jaeden Schafer So I don't know if they know anything else or they're just saying the quiet part out loud. Basically showed that they had this company called AXLL Solutions, and they had basically these chips and some other tech that they were using, and they were shipping between Singapore And Malaysia. So they weren't shipping this straight to Beijing from California, as that would put a lot of red flags, but they're going to Singapore and Malaysia. And again, this is kind of in line with the controversy that people have been talking about how Singapore is the third biggest, you know, purchaser of NVIDIA chips. We're sorry, a third of NVIDIA's sales are Singapore. It's like, wow, that's a, you know, small company, small country, a lot of GPU chips. But what was interesting was this company that was shipping to Singapore and Malaysia, they were getting their payments from Hong Kong and China. So the payments were pretty obvious. I don't know why they wouldn't have also just routed the payments through other countries, as this obviously made it pretty obvious where it was coming from. The DOJ also found a bunch of records and a bunch of communications that were saying that they were shipping to Malaysia to specifically go around US export restrictions. So it's pretty blatant what they were doing. ([Time 0:03:51](https://share.snipd.com/snip/04834f82-83ac-465a-b85b-bc2f6761bf6c)) - **No Support For Diverted GPUs** - NVIDIA called the case proof that smuggling is a "non-starter" and emphasized that diverted products get no service or updates. - The company uses lack of support as a deterrent against resale into restricted markets. Transcript: Jaeden Schafer This is what Nvidia said about this whole situation. They said, this case demonstrates that smuggling is a non starterstarter. We primarily sell our products to well-known partners, including OEMs who help us ensure that all sales comply with US export control rules. Even relatively small exporters and shipments are subject to thorough review and scrutiny, and any diverted products would have no service support or updates. Okay, so NVIDIA saying, look, this is a great example. They arrested these guys. That means that, you know, this is probably like a very crazy random example and it got shut down. So this, you know, isn't a thing that happens. I think in reality, there's probably a lot of these cases that go unprosecuted, that people that haven't been caught doing this. I don't think this is the only two people in all of America that were, you know, shipping tens of millions of dollars. ([Time 0:05:19](https://share.snipd.com/snip/0dcef3a4-ebdf-4f61-8781-96469c94ae27)) - **Government Proposes Chip Tracking** - The US AI action plan pushes stronger export controls and even suggested embedding tracking technology into chips to trace usage. - Chip makers strongly oppose that track-and-control idea, citing security and trust risks. Transcript: Jaeden Schafer What's kind of the political landscape around this whole situation right now? I think one of the biggest things right now is that the AI action plan has just come out. Trump recently announced this whole AI action plan. And in it, he basically says that, you know, it's really, really important that America has strong export restrictions. And so it's kind of a big thing that they have focused on a potential solution to curbing all of this smuggling that the US government suggested was to implement tracking technology Into chips. So basically, you know, they, they're just like, look, put some tracking technology into the chips. And then I think, you know, and then you know, like who's using them and where they're located. ([Time 0:06:49](https://share.snipd.com/snip/94f86609-d3c3-4b89-a966-ad743ebeea80)) - **Backdoors Would Create Universal Vulnerabilities** - NVIDIA warns that embedding backdoors and kill switches into chips would be "a gift to hackers and hostile actors." - The company argues such built-in access would undermine global digital infrastructure and fracture trust in U.S. technology. Transcript: Jaeden Schafer And then I think, you know, and then you know, like who's using them and where they're located. Chip makers are very opposed to this. I think this kind of makes a lot of sense. NVIDIA made a blog post on Tuesday all about this specific topic. And basically in their blog post, they say, quote, NVIDIA has been designing processes for over 30 years, embedding backdoors and kill switches into chips would be a gift to hackers And hostile actors. It would undermine global digital infrastructure and fracture trust in US technology. Established law wisely requires companies to fix vulnerabilities, not create them. Okay. They make a good point, but also I think they know that like this would completely shut it down. Whereas like if like, let's say 30 or 20% of the revenue might be seeping into China, that's kind of a huge chunk of revenue. They probably don't want to get shut off. Now, to be fair, they did like revise their forecasted numbers and completely remove China. Like, look, we're not selling anything to China, even though they're working on a deal to basically get some smaller chips shipped to China and be allowed to do that. But I think what they don't want is like, look, we don't want to put back doors in. This is something that China has been criticized for forcing companies in China to put back doors in. And so NVIDIA is like, look, we don't want to do that. And I think a lot of people might be like, yeah, but it's to fight against China. But I think most Americans probably don't, and American companies don't want backdoor government back doors into their chips from the US government either. It just seems like, you know, we already have enough of a surveillance state over here, in my opinion, but who am I? In any case, it is, it's pretty interesting. And they make a good point that basically it would be a vulnerability for hackers, right? You can imagine if they put these back doors in and it's all well-meaning, and maybe it's just to make sure that everybody's complying with the law. Some hacker gets an exploit, which is inevitable. It's not an if, but it's a when. And then if they were able to go and shut down all the GPUs in the world from that, like that would be horrible and really mess up a lot of AI companies, mess up a lot of innovation. So I think NVIDIA just like doesn't see a lot of pros to their own company in this. So they're pretty opposed to it. They say that's not sound policy. ([Time 0:07:30](https://share.snipd.com/snip/dbb9f749-6dde-477b-a080-08f52affb891))