A report by Reuters sheds light on how Chinese buyers are acquiring top-end Nvidia AI chips despite the U.S. sanctions imposed on their export. The SEG Plaza skyscraper in Shenzhen’s Huaqiangbei electronics area has become a hotspot for purchasing these chips discreetly. While not advertised, buyers can inquire discreetly and find vendors who can provide small quantities of A100 artificial intelligence chips, albeit at double the usual price of $20,000 per chip.
Although it is not illegal to buy or sell high-end U.S. chips in China, U.S. export restrictions have created an underground market. Vendors are cautious not to attract the attention of both U.S. and Chinese authorities. In September, the Biden administration prohibited the export of Nvidia’s two most advanced chips, the A100 and H100, to mainland China and Hong Kong. However, the demand for high-end chips has surged globally due to the increasing popularity of AI applications, particularly Nvidia’s microprocessors, known for their superior performance in machine learning tasks.
While some buyers, such as app developers, startups, researchers, and gamers, seek these chips, it was revealed that even Chinese local authorities are among the buyers. Ten vendors in Hong Kong and mainland China confirmed the availability of A100 chips in small quantities. Reuters could not estimate the overall volume of A100 and H100 chips entering China or the extent to which these transactions satisfy the demand.
Nvidia clarified that it does not permit the export of A100 and H100 chips to China and instead offers reduced-capability substitutes that comply with U.S. regulations. The company expressed its commitment to taking appropriate action if it becomes aware of customers breaching export agreements. The U.S. Department of Commerce, China’s State Council Information Office, and China’s industry ministry did not provide any comments on the matter.
To bypass the restrictions, Chinese vendors acquire the chips by purchasing excess stock from the market after Nvidia supplies large quantities to U.S. firms or by importing through locally incorporated companies in countries like India, Taiwan, and Singapore. However, these channels limit the quantities that can be obtained, preventing the building of sophisticated AI large language models from scratch.
While there are listings for A100 chips on e-commerce platforms such as Alibaba’s Taobao, Xiaohongshu (similar to Instagram), and Douyin (the Chinese version of TikTok), some vendors cautioned against fraud, as refurbished chips are sometimes passed off as A100s. The availability of Nvidia’s newer H100 chips, launched in March, is much scarcer, with only one out of ten vendors confirming their ability to procure them.
Analysts suggest that the U.S. may not be overly concerned about small chip transactions. They speculate that stricter enforcement may occur if China becomes a significant AI threat in the future. Furthermore, they believe that the current premiums commanded by Chinese vendors for A100 and H100 chips could diminish as many Chinese AI startups, which are the major purchasers, may eventually exit the market.