Two Charged in Scheme to Illegally Export AI Chips to China

The U.S. Department of Justice (DOJ) announced Tuesday that two Chinese nationals were apprehended for allegedly orchestrating the illegal export of high-performance AI chips, valued at tens of millions of dollars, to China.

According to the DOJ, Chuan Geng and Shiwei Yang were arrested in California on August 2 and face charges under the Export Control Reform Act, a felony carrying a potential 20-year prison sentence.

Geng and Yang are accused of deliberately exporting "sensitive technologies," including GPUs, to China through their California-based firm, ALX Solutions.

While the DOJ did not identify the chip manufacturer involved, the complaint described the chips as "the most advanced on the market" and "tailored for AI applications," strongly suggesting they were Nvidia's H100 GPUs, as confirmed by a Reuters report.

DOJ investigators reviewed export records and found that ALX Solutions shipped chips and other technologies to freight-forwarding firms in Singapore and Malaysia, receiving payments from entities in Hong Kong and China. Communications uncovered by the DOJ revealed efforts to bypass U.S. export restrictions by routing shipments through Malaysia.

"This case underscores that smuggling is not a viable option," an Nvidia spokesperson stated. "We primarily distribute our products through trusted partners, such as OEMs, who ensure compliance with U.S. export controls. Even small-scale exporters and shipments undergo rigorous scrutiny, and diverted products receive no service, support, or updates."

The arrests come as the U.S. grapples with balancing global AI innovation and stringent export controls targeting China, which many Western leaders view as a significant competitor in the AI race. The Trump administration's recently unveiled AI Action Plan emphasized robust export restrictions but offered few specifics.

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One proposed solution to combat chip smuggling, recently floated by the U.S. government, involves embedding tracking technology in chips to detect illicit exports. However, chipmakers have strongly resisted this idea.

In a Tuesday blog post, Nvidia stated that its GPUs do not contain kill switches or backdoors, arguing that such features would jeopardize security.

"Nvidia has been designing processors for over three decades. Incorporating backdoors or kill switches would be a boon for hackers and adversaries," the company wrote. "It would weaken global digital infrastructure and erode trust in U.S. technology. Current laws rightly mandate addressing vulnerabilities, not creating them."

"Such measures are misguided and would severely undermine America's economic and national security interests," Nvidia added.

Nvidia did not immediately respond to requests for further comment.

For more on the semiconductor industry's eventful year, check out this regularly updated timeline of market developments since early 2025.