Gray Market Smuggling Neutralizes U.S. Chip Bans in China

The U.S. government's attempt to maintain a compute moat is being undermined by a sophisticated gray market, as TechCrunch first reported. Research led by Will DePue of Unemployment Labs found evidence that frontier models from Chinese firms—including DeepSeek's V4 and Moonshot AI's Kimi K3—were trained on Nvidia Blackwell GPUs, despite those chips being banned for export to China.

Epoch AI estimates that approximately two million advanced chips entered China during 2024 and 2025 through destination-hiding schemes. A significant portion of this compute may be flowing through Malaysia, where Epoch AI estimates 275,000 Nvidia AI accelerators were imported in that same window. Sam Bresnick of the Georgetown Center for Security and Emerging Technology told TechCrunch that allowing Chinese companies to access chips in Malaysia while banning them in mainland China creates a critical loophole.

Central to these operations is Megaspeed and its subsidiary Speedmatrix, led by Alice Huang. Bloomberg reports a company linked to Alice Huang smuggled banned chips to a Shanghai data center, while Culper, a short-selling research firm, alleged Alice Huang's companies are backed by Chinese firms barred from U.S. chips.

These systemic leaks coincide with leadership turmoil at Nvidia. CEO Jensen Huang departed the company after admitting to an affair with Alice Huang, who has been alleged to be an agent of China's intelligence service. TechCrunch reports that Nvidia's potential corporate liability for export control violations likely influenced the decision to part ways with Huang. Meanwhile, Secretary of Commerce Howard Lutnick faces scrutiny over whether his investigators were too cozy with Nvidia officials and failed to identify suspicious buyers.