Security Firm Exposes Smuggled Nvidia Chips in State-Owned Chinese Network

Thirty-two restricted Nvidia chips have surfaced in the infrastructure of a major Chinese state-owned carrier, challenging the efficacy of recent U.S. export controls.

The discovery was made by Lava, an Israeli cybersecurity firm, which located Nvidia Blackwell Ultra B300 GPUs within the network of China Telecom. These specific chips have been barred from export to China under current regulations, which permit sales only to whitelisted buyers who agree not to transfer them to sanctioned parties. The presence of these units in a Chinese data center raises questions about how they bypassed the intended supply chain restrictions.

The issue of illicit chip transfers is not new. In 2025, reports indicated that Chinese entities smuggled approximately $1 billion worth of Nvidia AI chips into the country over a three-month period. While the B200 models were the primary target at that time, distributors were already preparing for the B300 series as it became available. The B300, announced in March 2025, offers significant performance improvements, including 50% more memory and FP4 compute capability compared to its predecessor. Nvidia marketed the chip as "built for the age of reasoning," citing its suitability for advanced large language models like DeepSeek R1. Although initially expected to ship by the end of 2025, the chip quickly became highly sought after.

The smuggling pipeline has become increasingly complex and targeted. In August 2026, nine individuals in Taiwan were indicted for illegally exporting B300 GPUs to China. This legal action followed an internal investigation by Supermicro, which resulted in the dismissal of several employees. The scheme reportedly involved a Taiwanese server trading firm, Flying Tiget Tech, which held the necessary whitelisted status to purchase the hardware. The high demand for these processors has also driven up prices for older silicon; five-year-old A100 servers have seen their prices triple, reaching up to $82,000, while some operators have even retooled gaming GPUs for AI workloads.

Lava identified the B300 chips using Nvidia’s DCGM Exporter tool, software designed for data center operators to monitor server health. Although intended for internal use, the tool can often be accessed from outside the data center’s network and does not always require password authentication. While the exact location of the chips within China Telecom’s network remains unconfirmed, their presence is established. Nvidia has previously acknowledged working on a tool to help locate its chips, but this solution has not yet been released.

Nvidia has downplayed the significance of the finding, stating that the diversion of controlled products is "a drop in the bucket" compared to China’s existing domestic compute capacity. A spokesperson noted that recent court cases have shown such diversion to be less than 0.5% of total volume, arguing that with tens of millions of GPUs in service in approved countries, smuggling remains a non-factor. The company did not deny the findings but insisted that governments on both sides of the globe are effectively blocking the flow of illicit hardware.

The next steps involve continued monitoring of Nvidia’s unreleased location-tracking tool and potential further investigations into the supply chain loopholes exploited by firms like Flying Tiget Tech. For now, the presence of these high-performance chips in a state-owned network serves as a tangible reminder that export controls face persistent technical and logistical challenges.