Inside the $160M Nvidia GPU Smuggling Scheme: How Export-Controlled AI Chips Were Illegally Shipped to China

By the ending of 2025, U.S. authorities uncovered a major tech smuggling operation that allegedly moved about $160 million worth of export-controlled Nvidia AI GPUs into China — despite strict American export laws designed to limit the transfer of advanced artificial intelligence hardware to geopolitical rivals.

What Happened?

Recently, the U.S. Department of Justice disclosed that a smuggling network — AKA Operation Gatekeeper by investigators — operated between October 2024 and May 2025, moving H100 and H200 GPUs manufactured by Nvidia from the United States to China and Hong Kong. These chips are critical for advanced AI and high-performance computing, making them subject to strict U.S. export controls.

Authorities say the scheme involved:

• Falsifying shipping paperwork and mis-labelling the GPUs to hide their true identity.

• Misclassifying shipments as generic “computer parts” to bypass customs scrutiny.

• Using fake brand names and shell companies to disguise the real destination of the GPUs.

• Routing shipments through third countries before final delivery to China and Hong Kong.

Prosecutors also allege the network received more than $50 million in wire transfers from China to finance these transactions. Several defendants, including U.S. and foreign nationals, now face serious federal charges, with potential prison sentences of up to 20 years for conspiracy, smuggling, and export control violations.

Export Controls & National Security Context

For years, the U.S. government has imposed export restrictions on advanced semiconductor technologies — especially GPUs like Nvidia’s H100 and H200 — due to national security concerns. These chips are not only crucial for commercial AI applications but can also be repurposed for military, surveillance, and other sensitive technologies.

Violating USA exports rules can lead to substantial criminal and civil penalties under the Export Control Reform Act.

Export controls on semiconductors aren’t new. For decades, American governments have sought to restrict the transfer of advanced computing and defence related technologies to competitor states. In the 2020s, these controls expanded significantly as artificial intelligence became a central component of economic and military power.

Image Credit - AI