Nvidia: Smuggled AI servers are a dead end, Huang warns
Nvidia: Smuggled AI servers are a dead end
Following Nvidia’s annual meeting with shareholders smuggled AI servers have once again become the number one topic. When asked about the risk of advanced chips ending up in restricted markets, the company’s CEO, Jensen Huang, made the matter clear: when commercial interests conflict with U.S. national security, the latter takes precedence.
The strongest message, however, was directed at buyers in the gray market. According to Huang, building a data center out of illegally imported equipment is a dead end—without software updates, technical support, and manufacturer service, such infrastructure quickly becomes useless.
Limited availability of AI accelerators is fueling the illegal trade in hardware.
“National security is paramount,” Huang emphasized during a session immediately following the annual meeting. He noted that, as an American company, Nvidia has a duty to support its government’s decisions, and that advanced AI systems are integrated entities requiring trusted hardware, software, network infrastructure, and ongoing support—all of which the smuggled equipment lacks.
Huang’s words are spoken in a specific context. In March 2026, the U.S. Attorney’s Office filed charges Yih-Shyan “Wally” Liaw, a co-founder of Supermicro, accusing him of orchestrating the diversion of servers equipped with Nvidia chips to China. The value of the equipment involved in the case was estimated at approximately $2.5 billion, and some of the shipments—worth nearly $510 million according to the indictment—had already reached end users. Liaw has pleaded not guilty.
An independent investigation has also been launched in Taiwan. The local prosecutor’s office raided more than a dozen locations and requested the arrest of three individuals suspected of forging shipping documents used to send Supermicro servers to China, Hong Kong, and Macau.
- The orders were placed by a front company from Southeast Asia, posing as the legitimate recipient.
- Servers containing banned Nvidia chips were first shipped to Taiwan, allegedly for regional distribution.
- Shipping documents were falsified, and serial numbers were altered to mislead customs inspectors.
- For the purposes of audits, dummy servers were set up to mimic legitimate deliveries.
The effects of stricter controls are most evident on the black market. After the gray market was shut down, prices for banned equipment in China skyrocketed — according to news agency reports, a single server equipped with Nvidia B300 chips can cost around one million dollars there, which is nearly twice the official price in the United States. The situation is further exacerbated by the ongoing memory shortage, which is driving up costs throughout the AI hardware supply chain.
For Nvidia itself, the Chinese market is less significant today than it was a year ago: China and Hong Kong accounted for about 9 percent of revenue in fiscal year 2026, compared to 13 percent the previous year. Although export licenses for H200 chips have been granted, as Huang acknowledged, the company has not generated significant revenue from them and does not know whether China will allow imports. Despite the tensions, Nvidia remains a financial giant: in the past fiscal year, it generated over $96 billion in free cash flow and announced it would return more than half of that amount to shareholders.