US Proposes Real-Time Chip Tracking Amid AI Showdown with China

US officials are considering embedding real-time location-tracking capabilities into semiconductors, including Nvidia chips, to control where US chips end up and prevent sensitive tech from flowing into China's AI ecosystem. Nvidia is already under scrutiny in China over national security concerns tied to its H20 chips. The move is part of the US's AI action plan and could reshape how semiconductors are designed, sold, and monitored.

Title: US Officials Consider Real-Time Location-Tracking for Semiconductors to Control AI Chip Exports

US officials are considering embedding real-time location-tracking capabilities into semiconductors, including Nvidia chips, to control where US chips end up and prevent sensitive technology from flowing into China's AI ecosystem. This move is part of the US's AI action plan and could reshape how semiconductors are designed, sold, and monitored.

The initiative comes as Nvidia is already under scrutiny in China over national security concerns tied to its H20 chips. The Cyberspace Administration of China (CAC) summoned Nvidia to explain whether its H20 artificial intelligence chips have backdoors that could allow the United States to remotely shut them down [1]. Nvidia has denied these allegations, stating that its chips do not contain such vulnerabilities.

The broader backdrop is a high-stakes tug-of-war over who sets the rules in the next wave of AI and how tightly those rules are enforced. Michael Kratsios, one of the architects of the plan, confirmed the discussions during an interview in South Korea, adding that the chip-level tracking approach is explicitly included in the strategy [2]. While the US has not named specific companies it is negotiating with, Kratsios said he has not personally spoken with Nvidia or AMD about implementing tracking tools.

Nvidia is already feeling the heat. Last week, Chinese officials summoned the company's representatives over alleged national security concerns tied to its H20 chips, the same chips Washington is debating whether to keep restricted or allow under a broader trade deal involving rare-earth magnets [2]. Nvidia, meanwhile, has rejected claims of any backdoors in its hardware.

Some analysts have expressed concern about the feasibility of real-time location tracking of chips at scale. Joseph Hoefer, a Washington, D.C.-based government relations strategist focused on AI, said that attempting to derive meaningful national security insights from hardware geolocation data would require vast infrastructure, reliable international cooperation, and intensive verification protocols [1]. Others argue that even if a chip management software can determine the location of a suspicious AI chip cluster, it will be too late, as it means Chinese firms have already obtained and deployed the chips.

Despite the challenges, the potential market for Nvidia's H20 chips remains significant. BofA Securities analyst Vivek Arya maintained a Buy rating on Nvidia, forecasting $210–215 billion in FY26 sales and $7 FY27 EPS as AI demand and Blackwell ramp drive long-term Nvidia growth [3]. Arya expects second-quarter revenue to come in at $47 billion, ahead of the $45.8 billion consensus, driven by a continued ramp in Blackwell GPUs and robust cloud infrastructure spending.

References:
[1] https://asiatimes.com/2025/08/china-fears-nvidia-chips-could-track-trace-and-shut-down-its-ais/
[2] https://finance.yahoo.com/news/us-wants-track-every-chip-000909180.html
[3] https://www.benzinga.com/analyst-stock-ratings/reiteration/25/08/46832344/nvidia-could-add-billions-from-china-sales-if-h20-gpus-get-green-light-from-us-analyst