NVIDIA and the New Reality of AI Chip Trade

In December, American tech company NVIDIA – famous for pioneering the graphics processing units (GPUs) behind PC gaming and the AI revolution – introduced location verification technology for its most advanced AI chips. The move aims to reduce the illicit flow of high-performance GPUs into restricted markets, especially China. Indeed, the fast-growing black market in AI chips has transformed these little pieces of silicon into high-value contraband.

Advanced AI chips sit at the centre of global competition. They power large language models, hyperscale data centres, and defence-linked research.

In 2022, the US government imposed export controls to restrict the sale of NVIDIA’s most advanced GPUs to China – including the A100 and H100, which underpin modern AI infrastructure. In response, and to remain compliant with US government export control regulations, NVIDIA introduced lower performance, China-specific variants of these chips.

However, that gap closed in October 2023 when the government expanded the restrictions to modified chips. At the same time, several Chinese AI firms were blacklisted, effectively cutting off supply.