Federal authorities arrested a man named Greg Lui on Thursday for allegedly smuggling servers containing $300 million worth of NVIDIA AI chips to China, a violation of US export laws. The arrest followed a high-profile case earlier this year in which officials released surveillance video of someone using a red hair dryer to remove serial number stickers from NVIDIA server boxes. Together, officials say the cases reveal an expanding criminal network rerouting NVIDIA's AI chips to China to profit from Washington's export controls, which make the restricted silicon valuable.
NVIDIA maintains it has followed the rules and has never been accused of aiding smuggling. However, government officials and industry critics point to gaps in the company's due diligence and question how it missed warning signs. One such sign, they say, is that countries adjacent to China, including Thailand and Singapore, received more chip shipments than they could use. Daniel Remler, a former State Department AI policy head, said he never received a clear explanation for why so many chips were going to Southeast Asia if they were not serving customers in China.
Bloomberg reported that operators in western China were building dozens of data centers capable of housing 115,000 restricted NVIDIA processors. Citing its sources, Bloomberg reported that US officials now believe China has already smuggled that many chips and more. One operation allegedly involved Super Micro and the red hair dryer. Accused collaborators from that wholesaler, including Super Micro co-founder Yih-Shyan "Wally" Liaw, allegedly found buyers in China eager for NVIDIA's latest AI technology.
To evade export controls, the company allegedly sold roughly $2.5 billion worth of AI servers to a Bangkok-based firm called OBON, which appeared to be using them for AI infrastructure in Thailand. The servers were instead shipped directly to end-users in China, and the conspirators allegedly used a hair dryer to move stickers from genuine NVIDIA products onto dummy servers to fool compliance officers. Officials say NVIDIA should have noticed that OBON lacked the physical capacity, 100 megawatts of data center space, to host the servers it bought, since Thailand has only a few hundred megawatts of AI data centers running.
NVIDIA disputed that reasoning. A spokesperson said a startup's growth plan in a friendly nation is an opportunity for America rather than a red flag to be feared, adding that NVIDIA-powered servers are financeable assets that help startups secure capital and infrastructure, including data center space. The company also said progress in AI chip development from Huawei means Chinese buyers do not need to smuggle in NVIDIA hardware.
NVIDIA CEO Jensen Huang has lobbied US officials to relax export curbs to China and other Asian nations, and convinced the Trump administration last year to allow sales of its previous-generation Hopper H200 accelerators to China. Support in Congress and the Senate for tighter export rules has been tepid, apart from a few hawks like Senator Elizabeth Warren. Huang recently declined Warren's invitation to testify on Capitol Hill, prompting a sharp response in which she said that if he has time for a $1 million-a-head dinner at Mar-a-Lago and to fly across the world to meet with President Xi Jinping of China, he should be able to answer questions from Congress.
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