US taking 25% cut of Nvidia chip sales “makes no sense,” experts say

Nvidia is reportedly testing new tracking software that could allow for the monitoring of the approximate location of its AI chips amid ongoing rumors of chip smuggling. This development comes as the company faces scrutiny over its supply chain and the potential illegal export of its products, particularly to China.

Deepseek, a Chinese AI startup, is reportedly using thousands of smuggled Nvidia chips for training its next major AI model, raising concerns about compliance with international trade regulations. This information comes from sources cited by The Information, highlighting the lengths to which the company is going to enhance its technological capabilities.

Starcloud, a startup backed by Nvidia, has successfully launched a satellite equipped with an Nvidia H100 chip, which is now operational and querying responses from Google's AI model, Gemma. This marks a significant milestone as it represents the first instance of training an AI model from space, showcasing the potential of orbital data centers in AI development.

Nvidia has stated that it has not observed any substantiation or received tips regarding chip smuggling through data centers outside of China, following a report by The Information about the Chinese AI startup DeepSeek's use of banned Nvidia chips for its AI models.

The Bay Area is poised to play a crucial role in the Genesis Mission, a multibillion-dollar initiative launched by the Trump administration aimed at enhancing the United States' artificial intelligence capabilities amid growing competition from China. This mission will leverage federal scientific datasets to train AI models and develop AI agents, marking a significant government effort to boost innovation in this critical sector.

Nvidia is developing technology to verify the physical location of its AI chips, primarily marketed as a fleet management tool, which could also assist in enforcing export restrictions. This initiative comes amid ongoing scrutiny regarding the potential smuggling of its chips, particularly into China.

US startups, including Oakland-based Brimstone, are intensifying efforts to develop domestic sources of critical raw materials essential for technology, an area historically dominated by China. This initiative is part of a broader strategy to enhance supply chain resilience and reduce dependence on foreign sources.

DeepSeek, a Chinese AI startup, is reportedly developing its next AI model using several thousand Nvidia Blackwell chips that were smuggled into China through third-party countries. This development raises concerns regarding compliance with international trade regulations and the implications of using restricted technology.