Takeaways from Our Investigation into Banned A.I. Chips in China

An investigation by The New York Times reveals that despite U.S. restrictions on the export of advanced A.I. chips, particularly from Nvidia, there is a thriving underground market in China for these banned technologies. The U.S. has implemented extensive measures to curb China's A.I. advancements, citing national security concerns related to military modernization. However, interviews with over 85 officials and industry experts indicate that businesses globally are finding ways to bypass these restrictions. The investigation identified a network of smugglers and numerous companies in China actively selling or transporting Nvidia chips, with some transactions reaching up to $103 million.

Additionally, procurement documents show that state-affiliated entities, including those under sanctions, have acquired these restricted chips. While Nvidia claims compliance with export laws, enforcement remains difficult, as companies can evade restrictions by establishing new entities or altering their registered addresses. For instance, former executives of Sugon, a company previously sanctioned, created a new firm, Nettrix, which quickly gained partnerships with major U.S. tech companies.

The investigation also uncovered instances where American chips were utilized in military-related research, including supercomputing systems for modeling nuclear weapons. Notably, many of Nvidia's listed partners in China have ties to the military or defense contractors, raising further concerns about the implications of these technology transfers.