Nvidia stated that bootleg data centers built on illicit chips face inherent economic disadvantages and operate as a losing proposition.
Nvidia issued a statement Thursday in response to a Financial Times report indicating that at least $1 billion worth of its artificial intelligence chips illegally entered China. The company said that data centers built with smuggled chips are a "losing proposition" and does not support unauthorized products. "Trying to cobble together datacenters from smuggled products is a losing proposition, both technically and economically," a company spokesperson told CNBC. "Datacenters require service and support, which we provide only to authorized NVIDIA products."
The FT report documented how Nvidia's B200 chips, which are prohibited from being sold to China, became popular on the black market despite export restrictions. According to the report, the smuggling accelerated as President Donald Trump rolled out restrictions on shipments of the company's H20 chips to the world's second-largest economy. Chinese distributors began selling the chips in May to data center suppliers whose customers include Chinese AI groups.
The unauthorized chip sales underscore the intensifying competition between the U.S. and China to lead the artificial intelligence race. China serves as a major market for chipmakers, but the U.S. has restricted many advanced processor sales there due to national security concerns. The U.S. government effectively blocked official sales to China in April when it told the company it would require a license for the H20 chip, which was created to work around previous export controls on China.
Last week, Nvidia CEO Jensen Huang announced that the company would soon resume selling its H20 chips to China following a breakthrough with the Trump administration on regulations. Huang has stated he wants to sell more advanced chips than the H20 to China, signaling Nvidia's desire to expand its authorized presence in the Chinese market despite the broader restrictions that remain in place.