US Charges Two Chinese Nationals with Exporting Advanced AI Chips Made by Nvidia Without Licenses

Two Chinese nationals, Chuan Geng and Shiwei Yang, were arrested for violating US export restrictions by shipping tens of millions of dollars worth of Nvidia AI chips to China. The defendants used a California-based company to export the chips, including Nvidia's H100 AI accelerators, without obtaining necessary government licenses. They could face up to 20 years in prison if convicted.

Two Chinese nationals, Chuan Geng and Shiwei Yang, were recently arrested for violating US export restrictions by shipping tens of millions of dollars worth of Nvidia AI chips to China. The defendants used a California-based company to export the chips, including Nvidia's H100 AI accelerators, without obtaining the necessary government licenses. They could face up to 20 years in prison if convicted.

This incident underscores the growing geopolitical tensions between the US and China, particularly in the realm of AI technology. The arrest comes amidst ongoing regulatory scrutiny of Nvidia's H20 AI chips in China, with the Cyberspace Administration of China (CAC) raising concerns about potential backdoors that could allow remote access or control [1].

Nvidia has maintained that its chips do not contain such backdoors, stating that "cybersecurity is critically important to us. Nvidia does not have 'backdoors' in our chips that would give anyone a remote way to access or control them" [1]. However, the CAC's allegations have cast uncertainty over Nvidia's sales prospects in China.

The US has also been pressuring chipmakers to build tracking systems into exported processors. U.S. lawmakers have proposed such measures, although no formal rules have been established [3]. The Trump administration's April 2025 export ban on high-end GPUs like the A100 and H100 forced Nvidia to pivot to the H20, a mid-tier chip designed to comply with US export controls [2].

The resumption of H20 AI chip sales to China in July 2025 has temporarily boosted projected 2026 China revenue to $19.5 billion, but faces risks from rising Chinese competitors like Huawei and Cambricon [2]. The US export restrictions have accelerated China's AI chip localization, with domestic market share expected to jump from 17% in 2023 to 55% by 2027 [2].

For investors, the key question is whether Nvidia can reassert its dominance in China while mitigating geopolitical risks. The company's recent $500 billion investment in U.S.-based AI supercomputers signals a long-term bet on domestic manufacturing. Yet, this strategy risks diluting its focus on China, a market that accounted for 13% of its 2024 revenue ($17 billion) [2].

The H20's success will hinge on three factors: regulatory stability, competitive resilience, and supply chain reliability. Continued US-China trade tensions or new export controls could disrupt sales. Can Nvidia's CUDA ecosystem retain developers amid Chinese alternatives? TSMC's capacity and U.S. government approvals will dictate the pace of H20 shipments [2].

The rise of Chinese AI chipmakers, such as Huawei and Cambricon, further complicates Nvidia's position. Huawei's Ascend 910C has gained traction in inference workloads and cloud services, while Cambricon's stock price has soared 400% in 12 months [2].

Investors must balance short-term H20 demand with long-term risks from geopolitical tensions, supply chain constraints, and China's self-reliance push. The H20 represents a bridge—a temporary reprieve in a market that is rapidly reshaping itself. For now, the H20's success hinges on navigating a complex landscape of regulatory scrutiny, competitive pressures, and geopolitical volatility.

References:
[1] https://www.morningstar.com/news/marketwatch/20250731182/nvidia-got-us-greenlight-to-sell-its-h20-chips-in-china-but-now-china-is-worried-about-security
[2] https://www.ainvest.com/news/nvidia-tenuous-entry-china-balancing-geopolitical-risk-ai-market-opportunity-2508/
[3] https://economictimes.indiatimes.com/tech/technology/nvidia-says-its-chips-have-no-backdoors-after-china-flags-h20-security-concerns/articleshow/123025317.cms?from=mdr