U.S. chip export controls appear to have some loopholes as big as a barn door, as the New York Times reports in an in-depth investigation.
Through these export restrictions, the U.S. aims to ensure that American companies maintain their technological edge in both chip manufacturing and the AI sector. In practice, however, the enforcement of these restrictions seems to fall short.
The NYT reporters illustrate this using the example of the Chinese state-owned company Inspur, which supplies Chinese companies and universities and — crucially — the Chinese military with high-performance chips and computer infrastructure that it purchases in the U.S.
To that end, Inspur had a branch office in Fremont, California. At least until the Biden administration placed the company on a blacklist of firms considered a security risk and prohibited it from doing business in the U.S.
Mission accomplished?
Apparently, all that was needed to circumvent the export restrictions was to change the nameplate at the Fremont office. It no longer reads “Inspur,” but rather “Aivres” — which is known to be a subsidiary of Inspur.
Between 2024 and 2026, this subsidiary exported, among other things, Nvidia’s strictly controlled Blackwell chips to various Southeast Asian countries for a total of $3 billion, including to a company named Megaspeed, which, according to the New York Times, has in the past been suspected by U.S. authorities of smuggling these chips into China.
But even the chips that do not end up directly in China go to Southeast Asian companies, which in turn provide cloud computing services to the Chinese tech giants, who use them to train their AI models.
Given such ineffective export restrictions, it’s actually no surprise that Chinese AI firms are hot on the heels of their American counterparts.
On top of that, the chips produced in China itself are also improving. Although they are still relatively far from the performance level of American chips, according to a Bloomberg report, it seems that the U.S. administration’s policies are making the Chinese product more attractive to third-party customers.
For example, Malaysia has decided to run its national AI program using cloud infrastructure and AI chips from Huawei instead of an American product, as Malaysia views the U.S. Cloud Act as a risk to security and sovereignty. The Cloud Act, signed by President Trump, stipulates that U.S. authorities must be able to access data stored on cloud infrastructure provided by American companies at any time, even if the servers are located in another country.
The Malaysian Prime Minister commented on this rather dryly during a Q&A session with students:
“I do not consider that law reasonable, but how does one argue with President Trump?”
It is important for the U.S. to step up its game here. Today, the U.S. lead in computing power and AI technology is at stake. But in a future where sanity prevails and we implement an international agreement to prevent the premature creation of artificial superintelligence, it will be essential to closely monitor compliance. This will mean ensuring that chips flow only to authorized users for authorized uses.
The analyses and opinions expressed on AI StopWatch reflect the views of the individual contributors and the sources they cover, and should not be taken as official positions of the Machine Intelligence Research Institute.