Nvidia's New Challenge: US Lawmaker Wants Company To Track Its Chips To Avoid Smuggling In China

The Trump administration has intensified semiconductor sanctions on top of its tariff policies.

The U.S. plans to introduce a ruling to verify the location of Nvidia Corp NVDA and peer-made artificial intelligence chips to prevent their smuggling into China, Reuters reported on Monday.

Nvidia stock is trading lower after the report.

Also Read: Analyst Sticks With Nvidia Despite Fallout From China Curbs

The Biden administration had already restricted China’s access to sophisticated semiconductor technology, including AI, citing national security threats.

Nvidia’s chips are critical to creating AI systems, including chatbots and image generators, to ones that can help craft biological weapons.

Reports have often indicated Nvidia AI chips flowing into China via illegal routes, and Nvidia has publicly acknowledged its failure to track its products after sales.

U.S. Representative Bill Foster, a Democrat from Illinois, plans to introduce a bill that would direct U.S. regulators to forge rules for tracking chips to ensure they remain in their legal location.

Reportedly, Chinese AI startup DeepSeek, whose AI systems posed a strong challenge to U.S. systems, were built with advanced Nvidia chips, Reuters cited SemiAnalysis.

Alphabet Inc’s GOOG GOOGL Google already tracks the location of its in-house AI chips and others for security purposes, Reuters cited unnamed sources familiar with the matter.

Foster’s legislation would give the U.S. Department of Commerce six months to develop laws requiring the technology.

Reportedly, Chinese tech giants, including ByteDance, Alibaba Group Holding BABA, and Tencent Holding TCEHY, hoarded billions of dollars worth of Nvidia’s H20 AI chips amid U.S. sanctions.

They aimed to snap up 1 million H20s before the latest U.S. semiconductor sanctions kicked in. The companies reportedly placed over $16 billion in orders for the quarter. 

Nvidia has bagged $18 billion of H20 orders since 2025 beginning. China has generated $17 billion in revenue in fiscal 2024, accounting for 13% of Nvidia’s total sales.

Price Actions: NVDA stock is down by 1.31% at $113.01 at the last check on Monday.

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