The US government is reviewing Chinese firms' ability to access Nvidia chips remotely via offshore cloud services as an export control loophole.
The Commerce Department's enforcement arm, the Bureau of Industry and Security, is reviewing how Chinese AI firms access Nvidia hardware overseas, focusing specifically on a legal gray area: Chinese companies renting computing power abroad rather than importing chips directly into China.
The review documents two distinct categories. The first identifies countries operating black markets that physically smuggle restricted Nvidia chips into China—a matter squarely within the agency's enforcement authority. The second catalogs countries where Chinese firms access the chips remotely, which is unusual because remote access is not currently illegal.
The scrutiny intensified following a breakthrough in Chinese AI development. Last month, Moonshot AI released Kimi K3, which scored nearly as high on benchmarks as the latest systems from Anthropic and OpenAI. A top White House official subsequently accused Moonshot of illegally obtaining Nvidia's best hardware and accessing the same chips remotely through an unnamed party in Thailand. The Commerce Department did not coordinate with the White House on this statement. Days later, the BIS enforcement team initiated its review.
Washington's position remains contradictory. Trump stated last year that sales of Nvidia's advanced Blackwell chips to China were prohibited, yet Kimi K3 demonstrated that Chinese firms can still reach these processors through entirely legal means. While some administration officials have long sought to close the remote-access loophole, Commerce shelved its own draft rules—including measures that would have curbed sales to Malaysia and Thailand over diversion concerns. Notably, Trump also approved exports to China of H200 chips, the same model officials claim smugglers are moving.
A fundamental legal obstacle complicates enforcement. The Bureau of Industry and Security built its authority around controlling the physical movement of goods, leaving unclear whether it can regulate cloud-computing arrangements at all. The House has passed bipartisan legislation to grant that authority, though passage through the Senate remains uncertain. Regardless of legislative outcomes, Nvidia and its competitors are prepared to challenge any restrictions on overseas data-center access.
Nvidia has already characterized export controls as the reason it "forfeited the world's second-largest commercial market to foreign competitors," warning that "America cannot afford to lose all of Asia next." Chinese cloud demand is a major driver of Southeast Asia's data-center expansion, and the economic stakes are substantial.
These arrangements are deliberately opaque by design. Buyers seldom identify their Chinese clients, who maintain distance even though regulations permit the setup. Alibaba, for instance, accesses Nvidia chips in Malaysia through Megaspeed, a Singaporean firm under US investigation for possible diversion. The companies do not deal directly. Instead, Alibaba routes the arrangement through a Singaporean shell entity controlled by a Cayman Islands company that Alibaba ultimately owns, according to documents reviewed. Neither company commented or responded to inquiries. The hardware remains stationary; only the computational workloads cross borders. Closing this gap likely requires new legislation rather than administrative action.