How China obtains Nvidia chips for AI development despite US export controls

Nvidia CEO Jensen Huang has admitted to an affair with a Chinese executive suspected of smuggling AI chips, prompting an FBI investigation and raising concerns about China's access to restricted technology. The scandal has spotlighted how China obtains advanced Nvidia GPUs despite US export bans. Washington restricts top-end Blackwell and Rubin chips over military AI concerns, but China accesses them through smuggling and by renting computing power at data centers in third nations like Malaysia and Thailand. Chinese firms also use homegrown alternatives from Huawei, Alibaba, and Baidu, though these lag in performance and cost more to operate. Chinese-made chips are improving rapidly, with Huawei accelerating its next-generation AI chip launch to early 2027. Local governments subsidize electricity and chip costs to support domestic development, while US policy has eased on less powerful H200 chips with a 25% sales cut.