Nvidia Develops Tracking Software Amid Rising Chip Smuggling Concerns
In response to escalating reports of its advanced AI chips being illicitly transported into China, Nvidia is reportedly developing software capable of tracking the geographical location of its hardware. This initiative aims to bolster the company’s ability to monitor and control the distribution of its products, particularly in regions subject to stringent export regulations.
Development of Location Verification Technology
According to sources cited by Reuters, Nvidia has engineered a location verification system designed to ascertain the country in which a chip is operating. This software primarily monitors computing performance metrics, but it also analyzes communication delays between servers to infer the hardware’s physical location. Initially, this tracking feature will be optional for customers and is slated for deployment with Nvidia’s forthcoming Blackwell series of chips.
Allegations of Smuggling and Nvidia’s Response
Recent reports have surfaced alleging that China’s DeepSeek AI models have been trained using smuggled Nvidia Blackwell chips. In response, Nvidia has stated that it has not found any evidence to substantiate these claims. A company spokesperson conveyed to TechCrunch, We haven’t seen any substantiation or received tips of ‘phantom data centers’ constructed to deceive us and our OEM partners, then deconstructed, smuggled, and reconstructed somewhere else. While such smuggling seems far-fetched, we pursue any tip we receive.
Context of U.S. Export Controls
This development follows the U.S. government’s recent approval for Nvidia to sell its H200 AI chips to authorized customers in China. However, this authorization pertains solely to the older H200 models and does not extend to the more advanced Blackwell chips. The U.S. has been tightening export controls on semiconductor technology to prevent advanced AI capabilities from reaching certain countries, including China.
Historical Instances of Chip Smuggling
The issue of chip smuggling is not new. In August 2025, two Chinese nationals were arrested in California for allegedly violating the Export Control Reform Act by illegally shipping high-performance AI chips to China. The Department of Justice indicated that the individuals knowingly and willfully exported sensitive technologies, including GPUs, through their company, ALX Solutions. While the DOJ did not specify the manufacturer, descriptions suggest the chips were likely produced by Nvidia.
Nvidia’s Stance on Embedded Security Measures
In light of these incidents, there have been discussions about implementing tracking technologies or kill switches within chips to prevent unauthorized use. However, Nvidia has expressed strong opposition to such measures. The company argues that embedding backdoors or kill switches would compromise security and could be exploited by malicious actors. Nvidia stated, Embedding backdoors and kill switches into chips would be a gift to hackers and hostile actors. It would undermine global digital infrastructure and fracture trust in U.S. technology.
International Efforts to Curb Smuggling
Other countries have also taken steps to prevent the unauthorized export of AI chips. In March 2025, Singaporean authorities arrested three individuals suspected of smuggling Nvidia chips and committing fraud against companies like Dell and Super Micro by misrepresenting the servers’ final destinations. The alleged scheme involved transactions totaling approximately $390 million. The suspects were granted bail, with the next court hearing scheduled for May 2.
Challenges in Enforcing Export Controls
Despite these efforts, enforcing export controls remains challenging. Reports indicate that Chinese buyers have been acquiring Nvidia’s Blackwell chips through third-party traders in countries such as Malaysia, Taiwan, and Vietnam. These intermediaries purchase the chips for their own use and then resell a portion to entities in China, effectively circumventing U.S. export restrictions.
Conclusion
Nvidia’s development of location verification software represents a proactive approach to addressing the complex issue of chip smuggling. By enhancing its ability to track the geographical deployment of its products, Nvidia aims to ensure compliance with international trade regulations and maintain the integrity of its supply chain. However, the effectiveness of such measures will depend on cooperation from customers and the broader tech industry, as well as ongoing vigilance from regulatory authorities.
