Nvidia tells cloud partners to limit Chinese customers as HBM smuggling fills the gap

The gap matters beyond Nvidia. Export controls restrict chip shipments but generally do not cover remote access through cloud services. Chinese AI labs can still rent compute abroad. Cloud providers must now vet who sits behind a contract. It is unknown how widely the guidance applies.

Nvidia asks cloud partners to limit Chinese customers

The report cited The Information and three people familiar with the matter. The instruction went out verbally through sales reps and regional teams, according to the Financial Times, as The Decoder reported.

Nvidia also asked cloud customers to disclose the identity of end users accessing the chips. That is the part with teeth. U.S. authorities had been looking into Chinese AI companies reaching advanced chips through foreign data centers. The scrutiny followed allegations involving Moonshot AI, the developer behind the Kimi chatbot.

The HBM smuggling economy

Tom's Hardware reported on 3 November that a memory smuggler described his route for export-controlled HBM chips. He pairs memory from South Korea with cheap, low-performing processors that fall under U.S. and South Korean export controls. The memory itself comes from Samsung and SK hynix and is banned for export to China on its own. The rules look only at server processor performance, not at attached components. The HBM therefore travels inside a legal-looking board.

The boards land in Hong Kong and cross into Shenzhen in commuters' luggage. Technicians heat the boards to soften the solder, lift the memory chips and discard the rest. The failure rate is high. The price makes the risk worth taking. A Shenzhen chip broker told The Information that one HBM3E unit sold for several hundred dollars a year ago and about $4,000 today. With six to eight high-end memory chips per AI chip, that works out at $24,000 to $32,000 per GPU.

Enforcement is tightening. Washington has made arrests, including some Super Micro executives and the chief executive of a California-based tech company. Taiwan and Malaysia are also ramping up anti-smuggling work, Tom's Hardware reported. Seoul has yet to follow them, according to the same report.

Huawei's memory bottleneck

Huawei's Ascend 950DT sells for about $37,000, according to Tom's Hardware. That is similar pricing to Nvidia's B200 but only half the performance of the previous-generation H100. Huawei has reportedly said its next flagship, the 960DT, would match the H100.

Memory is the constraint. Huawei cannot buy HBM from Samsung and SK hynix. Chinese memory makers also lack capacity for all its chip demands. The company has told customers to find the HBM their servers need themselves, pushing more buyers toward the smugglers. CXMT has begun risk production of HBM3E and is expected to mass produce it by the end of this year. It reportedly suffers from low yield.

Buying a weak link in chip design

Beijing-based Empyrean said in a Shenzhen Stock Exchange filing on Sunday that it would acquire a 50.38 per cent stake in Easy-Logic Technology. The price is 218.8 million yuan, or US$33 million. Easy-Logic, founded in 2021, builds logic optimisation tools that help chip designers cut iteration time and resource requirements.

Empyrean said the start-up's algorithms had won international EDA competitions and that its products were used by nearly 100 digital chip design firms globally. SCMP reported the purchase highlights Chinese efforts to reduce reliance on Western chip-design software and to support Huawei's Tau Scaling Law.

Market reality check

Reuters, as cited by CleanTechnica on 1 November, said China's AI bubble "has already burst". Over four months the STAR50 index of AI and semiconductor companies fell 40%, wiping out $480 billion in market value. CXMT lost more than a quarter of its value in the past month. Robotics company Unitree has halved since its August IPO.

Dong Baozhen, a Beijing fund manager, told Reuters: "The stock market later evolved into a speculative crazy bull, and now we see the bubble bursting".