The U.S. Department of Justice (DOJ) said on Tuesday that two Chinese nationals have been arrested for their alleged involvement in illegally shipping tens of millions of dollars’ worth of high-performance AI chips to China.
The DOJ said Chuan Geng and Shiwei Yang were arrested in California on August 2 and charged with violating the Export Control Reform Act, a felony that carries a statutory penalty of a maximum of 20 years in prison.
Geng and Yang are accused of knowing and willfully shipping “sensitive technologies,” including GPUs, to China from the U.S. through their California-based company, ALX Solutions.
The DOJ did not name the company whose chips ALX Solutions was allegedly smuggling, but quoting a complaint, it said the chip is “the most powerful chip in the market” and is “designed specifically for AI applications.” That description makes it likely that the chips being smuggled were made by Nvidia. A report by Reuters specifically named Nvidia’s H100 GPUs as the chips being shipped.
A review of export documents by the DOJ found that ALX Solutions sent chips and other tech to shipping and freight-forwarding companies in Singapore and Malaysia, but received payments from entities in Hong Kong and China in return. The department also found records of communication regarding shipping the tech to Malaysia to specifically go around U.S. export restrictions.
“This case demonstrates that smuggling is a nonstarter,” an Nvidia spokesperson said in a statement. “We primarily sell our products to well-known partners, including OEMs, who help us ensure that all sales comply with U.S. export control rules. Even relatively small exporters and shipments are subject to thorough review and scrutiny, and any diverted products would have no service, support, or updates.”
The news comes as the U.S. tries to figure out how to strike a balance between fostering global AI innovation and imposing export restrictions to China, which many in the West perceive to be a major threat in the AI race. The Trump administration’s recently announced AI Action Plan belabored the importance of having strong export restrictions but was light on details.
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One potential solution to curb chip smuggling that has been suggested by the U.S. government in recent days is to implement tracking technology into chips to help catch smuggling, but chipmakers are quite opposed to such a move.
In a blog post on Tuesday, Nvidia said its GPUs do not include kill switches or backdoors, and argued that building in such tools would only result in compromising security.
“Nvidia has been designing processors for over 30 years. Embedding backdoors and kill switches into chips would be a gift to hackers and hostile actors,” the company wrote. “It would undermine global digital infrastructure and fracture trust in U.S. technology. Established law wisely requires companies to fix vulnerabilities — not create them.”
“That’s not sound policy. It’s an overreaction that would irreparably harm America’s economic and national security interests,” Nvidia wrote.
Nvidia did not immediately return requests for additional comment.
For more on the semiconductor industry’s tumultuous year so far, here’s a regularly updated timeline of market news since the beginning of 2025.
