US detains two for allegedly smuggling $160 mn Nvidia AI chips to China

By Vlad Savov

 

The US Department of Justice has detained two men for allegedly violating export control laws by attempting to smuggle at least $160 million worth of Nvidia Corp. AI chips to China. A third, the owner of a Houston company, has already pleaded guilty. 

The department alleges the men operated a smuggling network that spanned the Houston business, run by Alan Hao Hsu, and several warehouses across the US, which replaced Nvidia labels from H100 and H200 AI chips with the fictional “Sandkyan” brand before shipping them. Fanyue Gong, a Chinese citizen residing in Brooklyn, New York, and Benlin Yuan, a Canadian from Ontario, are alleged to have conspired with employees of a Hong Kong-based logistics company and a China-based AI technology company to circumvent US export controls.

 

The announcement demonstrates the importance of the chips that have become the center of a growing rivalry between Beijing and Washington. The US has, up until some easing of rules under President Donald Trump this year, ramped up restrictions on exports to China, which it has said constitute a threat to national security. Those rules have cost Nvidia and its counterparts billions in lost revenue. 

 

The company’s Hopper generation of artificial intelligence chips was led initially by the H100, which was succeeded by the upgraded H200 in 2023. The DOJ’s Office of Public Affairs revealed the allegations on the same day that Trump said he’d allow Nvidia H200 sales to China for the first time — to a select number of customers.

 

“Operation Gatekeeper has exposed a sophisticated smuggling network that threatens our Nation’s security by funneling cutting-edge AI technology to those who would use it against American interests,” US Attorney Nicholas Ganjei said in the statement. “These chips are the building blocks of AI superiority and are integral to modern military applications.”

 

Santa Clara, California-based Nvidia has now moved on to its Blackwell family of chips and plans another generational upgrade in 2026, which Trump pointed to as reason to believe the US will retain its technological superiority even while allowing China some access.

 

Nvidia Chief Executive Officer Jensen Huang has long advocated for opening sales to China, so that what he calls the American technology stack could proliferate globally. He’s also repeatedly said that he’s seen no evidence of his company’s semiconductors being diverted to the Chinese market.

 

“The export system is rigorous and comprehensive,” an Nvidia spokesperson said on Monday. “Even sales of older generation products on the secondary market are subject to strict scrutiny and review. While millions of controlled GPUs are in service at businesses, homes, and schools, we will continue to work with the government and our customers to ensure that second-hand smuggling does not occur.”