Restricted AI Chips Found in Chinese Network
An Israeli firm discovered export-controlled GPUs inside the systems of a state-owned Chinese telecom provider, raising new questions about supply chain security.
By Thabo Mokoena ·
Advanced computer chips banned from export to China have been found inside the network of a state-owned Chinese telecommunications company. This discovery highlights the ongoing struggle to control the flow of powerful technology. Security firm Lava identified 32 Nvidia Blackwell Ultra B300 processors within China Telecom's infrastructure. These specific chips are subject to U.S. export controls that restrict their sale to approved buyers only. The presence of these restricted components in a Chinese data center raises immediate questions about how they bypassed these rules.
Nvidia has responded to the report by downplaying the significance of the issue. A company spokesperson stated that government and court investigations have found diversion of controlled products to be less than one half of one percent. The spokesperson described this level of leakage as 'a drop in the bucket compared to the ocean of domestic compute China already has.' The company maintains that smuggling remains a nonfactor in its operations, noting that it is blocked by governments on both sides of the globe. This statement did not deny the specific findings from the Israeli security firm.
The investigation could not determine how these processors ended up in China Telecom's server racks. Lava also cannot confirm the exact location of the chips within the company's network. The discovery was made possible through Nvidia's own DCGM Exporter tool. This software, which monitors server health, can sometimes be accessed from outside a data center's network. It also does not always require password authentication for access. Nvidia has previously confirmed it is working on a tool that can locate its chips, but it has not yet been released.
The B300 chip is a highly sought-after component for data center operations. Announced in March 2025, it is among the most powerful GPUs available. The chip provides significant performance improvements, including 50 percent more memory and FP4 compute than the previous B200 model. Nvidia described it as 'built for the age of reasoning.' This high demand has created a black market for the processors. In August 2026, nine people were indicted in Taiwan for illegally exporting B300 GPUs to China.
The pressure to obtain Nvidia's silicon has led to other illegal activities. Supermicro confirmed it fired several employees after an investigation into smuggling. The smuggling process involved a Taiwanese server trading firm called Flying Tiget Tech, which had whitelisted status for GPU purchases. The demand for Nvidia's technology affects prices for all its products. The price for A100 servers has tripled, despite the hardware being five years old. These units can cost up to $82,000.
The crackdown on illegal chip exports has also led to creative workarounds. Some individuals are retooling gaming GPUs to run AI workloads where possible. This workaround is an attempt to bypass restrictions on obtaining specialized data center processors. The ongoing situation shows a clear conflict between export controls and high demand for advanced computing power. The discovery of restricted chips in a Chinese state-owned network shows the issue persists. It remains unclear how these specific components entered China Telecom's systems. Nvidia's response focuses on the overall scale of its business, while the specific method of smuggling remains unknown.
Source: Tom's Hardware
