Nvidia Supplier Megaspeed Under Investigation for Alleged AI Chip Diversion to China

Reviewed byNidhi Govil

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Singapore-based Megaspeed, a major Nvidia customer, is under investigation by U.S. and Singaporean authorities for allegedly helping Chinese companies bypass export restrictions on advanced AI chips.

Megaspeed's Alleged Role in AI Chip Diversion

Singapore-based Megaspeed, a major customer of Nvidia, has come under scrutiny from both U.S. and Singaporean authorities for allegedly helping Chinese companies evade U.S. export restrictions on advanced AI chips

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. The company, which emerged in 2023 as an offshoot of a Chinese gaming firm, allegedly spent around $2 billion on Nvidia AI processors, potentially making them available to Chinese entities or re-exporting them to China

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Source: Tom's Hardware

Source: Tom's Hardware

Complex Procurement Network

Megaspeed's procurement strategy involved purchasing Nvidia hardware through Aivres Systems, a California-based arm of Inspur, a major Chinese technology company previously sanctioned by the U.S.

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. This arrangement exploited a regulatory loophole that separated Inspur's American entity from its blacklisted parent. The chips were then reportedly routed to facilities in Indonesia and Malaysia belonging to Speedmatrix, a Megaspeed subsidiary

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Investigations and Suspicions

The U.S. Bureau of Industry and Security's inspection of Megaspeed's Malaysian data center in late 2024 raised suspicions when they found Nvidia servers and GPUs still sealed in their crates, suggesting possible re-export plans

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. The Commerce Department's ongoing investigation focuses on whether Megaspeed is helping Chinese firms sidestep American export restrictions

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Source: The New York Times

Source: The New York Times

Nvidia's Response and Political Reaction

Nvidia has stated that its compliance team found no evidence of diversion and that Megaspeed was operating a small commercial cloud, as allowed by U.S. export control rules

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. However, U.S. Senator Tom Cotton has called for a Commerce Department investigation into Megaspeed, citing concerns about chip smuggling undermining U.S. export controls

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Source: CNBC

Source: CNBC

Broader Implications

This case highlights the challenges in enforcing technology export controls as competition in the global AI chip market intensifies

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. It raises questions about Nvidia's ability to track its chip exports effectively and comply with U.S. restrictions on the sale of its most advanced AI chips to China

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. The situation also underscores the complex networks that some Chinese companies employ to access restricted technologies, including the use of global middlemen and shell companies

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