Smuggling of $1 billion worth of Nvidia AI chips by Chinese companies over the past three months, despite escalating export restrictions. Some companies are not only advertising but also boasting about their forthcoming B300 stock.
The U.S. has enacted a ban on the export of certain AI chips to specific countries, including China. However, China has no such restrictions in place, creating a significant demand for these banned chips within the country.
Singapore is considering blocking the sales of these chips to Malaysia and Thailand, aiming to curb the flow of these banned products. Yet, the demand remains high, leading to the emergence of a black market.
The black market for these banned chips has seen a surge in activity, stimulated by the U.S. export ban. This is evident in the booming repair demand for Nvidia AI chipsets and the unofficial trade that is taking place.
One company, Gate of the Era, is estimated to have sold several hundred racks of these banned chips, with its gross sales almost reaching $400 million. The Nvidia B200 model, the most sought-after AI chip in the black market, has seen a significant increase in demand after the ban was imposed.
The U.S. is pushing its allies to start cracking down on these smuggling operations, but the demand continues to persist. Sellers can make more than $100,000 for each sale of the B200 AI chips due to the high demand and prices.
The Financial Times reports that the going rate for one rack with eight B200 AI GPUs is around CNY 3 to 3.5 million or about US$420,000 to US$490,000. These banned chips can be found openly advertised on Chinese social media apps like Douyin and Xiaohongshu.
Despite the crackdown, smugglers continue to find ways to get these AI chips into the hands of their paying customers. The U.S. government briefly reversed the ban, allowing Nvidia and AMD to resume shipments of H20 chips to China, albeit with reduced compute power to comply with control rules.
This indicates the practical challenge and economic cost of completely severing China’s access to high-end chips, partly due to the existence and impact of the black market and demand. The U.S. export controls aim to prevent cutting-edge chip tech from aiding Chinese military and surveillance applications. However, the black market undermines these controls to some extent by enabling acquisition through unofficial means, complicating enforcement and national security efforts.
Gina Raimondo, former U.S. Commerce Secretary, has called moves like this a fool's errand. Jensen Huang, CEO of Nvidia, has downplayed the black market demand for Nvidia's most powerful AI chips. On the other hand, Huang believes export controls are a failure and encourages China to build its own hardware infrastructure.
In summary, the U.S. ban on H20 GPUs for China significantly increased black market activity for advanced AI chips, evidenced by booming repair demand and unofficial trade. This illicit demand pressure partly motivated the U.S. government to ease some restrictions, allowing compliant H20 chip sales to resume under tight controls to regulate flow and reduce reliance on the black market.
- The demand for banned AI chips in China has led to an active black market, with repair demands for Nvidia AI chipsets increasing significantly and unofficial trades occurring.
- In the black market, the Nvidia B200 model is the most sought-after AI chip, with prices reaching up to USD 490,000 for a rack with eight GPUs.
- The U.S. has expressed concerns about the impact of the black market on its export controls for high-end chips, as it enables acquisition through unofficial means, complicating enforcement and national security efforts.
