US Allegedly Inserts Hidden Trackers in AI Chips Bound for China to Monitor Shipments.

The US government is allegedly placing hidden location trackers in shipments of high-end AI chips bound for China as part of an investigation into illegally diverted shipments. Trackers are only placed in "high-risk" shipments, and those involved in smuggling have reportedly been warned to watch out for them. Nvidia's CEO has denied that the company's most advanced AI chips are reaching China, while the US government aims to slow China's progress in AI due to its dual-use technology in civilian and military purposes.

The United States government is reportedly placing hidden location trackers in shipments of advanced artificial intelligence (AI) chips destined for China as part of an investigation into illegally diverted shipments. This move is part of a broader effort to monitor and control the flow of high-tech goods to China, a country viewed as a major competitor in the AI and semiconductor sectors [1].

The trackers are being embedded in high-risk shipments of AI processors from companies like Nvidia and AMD, often delivered inside servers made by Dell and Super Micro Computer. The devices are hidden in packaging or within the servers themselves, making them difficult to detect [1]. The aim is to follow the chips' movement after export and identify smuggling networks. According to Reuters, officials from agencies such as the Commerce Department’s Bureau of Industry and Security, Homeland Security Investigations, and the FBI are involved in this operation [1].

This initiative follows the 'Chip Security Act' proposed by Senator Tom Cotton in May 2025, which requires location tracking in export-controlled AI chips. The White House is also considering GPS-free tracking methods [1]. Notably, tracking devices have long been used by US authorities to monitor other sensitive goods, but the focus on AI chips marks a new front in the technology export battle [1].

The latest measure is part of the United States' wider enforcement of restrictions introduced in 2022, which ban the sale of top-tier semiconductors to China over concerns they could be used in military projects or advanced surveillance systems. The timing of this development is significant, given recent reports that around $1 billion worth of Nvidia’s AI chips, including the H100, H200, and B200, were smuggled into China despite the US export ban [1].

The U.S. government is also considering imposing new restrictions on the sale of such processors to Malaysia and Thailand, which are being used as intermediaries to bypass existing export bans [1]. Malaysia, in particular, is a major hub for chip assembly and testing, exporting $37 billion in semiconductors in 2024, over a third of which went to China and Hong Kong [1].

Nvidia's CEO Jensen Huang has consistently denied that the company's most advanced AI chips are being diverted to China, but multiple outlets confirm a strong black market for these cutting-edge chips. The U.S. has been clamping down on the alleged smuggling of high-end semiconductors, with American allies such as Singapore taking action to stop the flow of these AI chips through their borders [2].

In response to these developments, Nvidia and AMD have agreed to give the U.S. government 15% of their revenue from sales of their respective AI data center chips designed for the China market in exchange for obtaining export licenses. This deal was reported by the Financial Times, which first broke the story on Sunday night [3]. The U.S. Commerce Department began issuing export licenses for Nvidia's H20 chip and AMD's MI308 chip on Friday [3].

The U.S. government's actions reflect a broader strategy to slow China's progress in AI due to its dual-use technology in civilian and military purposes. Despite these efforts, China has continued to invest heavily in AI and semiconductor technology, making the U.S. government's challenge significant [2].

References:
[1] https://thetechportal.com/2025/08/13/us-using-hidden-trackers-in-ai-chip-shipments-to-block-illegal-transfers-to-china-report/
[2] https://www.yahoo.com/news/articles/u-authorities-allegedly-placed-secret-125955977.html
[3] https://www.aol.com/nvidia-pay-u-government-15-010000524.html