<div id="readability-page-1"><div>On Dec. 8, Federal prosecutors in Texas unsealed documents that revealed an investigation into a massive smuggling network that stretched across the U.S. and the world.Dubbed &#34;Operation Gatekeeper&#34; by the feds, the investigation wasn't focused on drug smuggling or stolen goods but rather an alleged secret, underground network of suppliers for Nvidia's graphic processing units, or GPUs. Such chips are the backbone of the AI race, and can be used for military or civilian purposes. The government said a hidden smuggling ring was sending chips to China in defiance of American national security export control laws. The smuggling syndicate allegedly involved operatives illegally entering the United States, phony front companies and a secret warehouse shipping operation in New Jersey that was penetrated by at least one undercover agent working on behalf of the U.S. government. What that federal investigation found showcases the desperate struggle between the United States and China for access to cutting-edge chips that many believe will control the fate of the global economy. The smuggling ring, they said, attempted to export at least $160 million worth of Nvidia H100 and H200 GPUs to China between October 2024 and May 2025.The demand for these chips from China is enormous, and the best supply is still in the United States. Although China is establishing its own local AI chip market, the county remains highly dependent on Nvidia's technology. &#34;I think more than 60% of the leading AI models in China are currently using Nvidia's hardware,&#34; said Ray Wang, an analyst at SemiAnalysis. &#34;Nvidia have [a] systematic advantage ranging from hardware to software. And I think for now, if you combine [those] two factors together, it's still a thing that China is trying to catch up to.&#34; As they gathered facts, the government sent an undercover agent into a warehouse in Secaucus, New Jersey. There, the person allegedly witnessed suspects relabeling Nvidia GPUs with branding for a phony company they called &#34;Sandkayan.&#34; The shipping and export paperwork, the government said, misclassified the goods as &#34;adapters,&#34; &#34;adapter modules&#34; and &#34;contactor controllers.&#34; Operation Gatekeeper culminated in a dramatic scene at the New Jersey warehouse on May 28 as three trucks hired by the conspirators pulled in to pick up the smuggled chips.In near real time, a user in a text chain allegedly used by the conspirators messaged that one of the truck drivers transporting the goods to the New Jersey warehouse reported that police officers had appeared at the scene and were asking questions about the cargo's destination.According to the texts, conspirators told the drivers to &#34;just say they don't know anything.&#34;Five minutes later, according to prosecutors, one of the conspirators sent another message to the entire text thread: &#34;Dissolve this group chat. Delete everyone.&#34; Soon after that, prosecutors said federal agents swooped in and secured the high-tech equipment, preventing the goods on site from being shipped to China. The case comes amid a flurry of similar busts regarding unauthorized Nvidia exports in recent months. The think tank Center for a New American Security estimates that between 10,000 and several hundred thousand AI chips were smuggled to China in 2024 alone.&#34;In today's world, I feel there's so many ways that you can get your hand on Nvidia's chips in all kinds of illegal&#34; ways, Wang said. &#34;You can set up your data center globally, you can have shell companies to purchase Nvidia chips. And it's so hard to for Nvidia to track and do due diligence.&#34;A Nvidia spokesperson told CNBC that the U.S. government's export is rigorous and comprehensive.&#34;Even sales of older generation products on the secondary market are subject to strict scrutiny and review,&#34; the Nvidia spokesperson said. &#34;While millions of controlled GPUs are in service at businesses, homes, and schools, we will continue to work with the government and our customers to ensure that second-hand smuggling does not occur.&#34;But on the same day that federal prosecutors announced their investigation, President Donald Trump made a social media post that could undermine the whole operation. Trump said on Truth Social that the United States would now allow Nvidia’s H200 GPUs — the most powerful GPUs seized by authorities in Operation Gatekeeper — to be exported to China. Trump said those exports would be allowed provided that the the U.S. received a 25% cut of the sales. Trump added that Nvidia's most advanced AI chips, the Blackwell and Rubin GPUs, are still not authorized for export. Operation Gatekeeper resulted in the arrests of two businessmen and a guilty plea from a Houston man and his company for smuggling the cutting-edge AI technology. But the president's announcement has scrambled the case for U.S. prosectors trying to make the case that smuggling the same chips is a danger to the country's national security. Defense attorneys for the men charged were quick to pounce on the opportunity. In a court filing the next day, defense attorneys wrote that &#34;the President gave the lie to that claim when he announced that the United States will now allow Nvidia's H200 GPUs—the most powerful GPUs seized by authorities in this case—to be exported to China.&#34;Some experts said they believe smuggling of even Nvidia's highest end AI chips into China will continue. &#34;I don't believe the smuggling will just stop,&#34; Wang said. &#34;It is unclear to me that the new opening of the H200 chips will be enough for Chinese AI demand. The compute demand we are seeing globally has been accelerating, and I believe that should be the case in China as well.&#34;</div></div>

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Federal prosecutors in Texas revealed a smuggling network, dubbed "Operation Gatekeeper," that allegedly exported $160 million worth of Nvidia GPUs to China, violating U.S. export control laws. The operation involved falsifying shipping documents and using undercover agents to infiltrate a New Jersey warehouse. The investigation highlights the ongoing struggle between the U.S. and China for access to advanced AI chips. Despite Nvidia's efforts to prevent illegal exports, the demand for their technology in China remains high. The case has led to multiple arrests and a guilty plea related to the smuggling activities.

- On December 8, federal prosecutors revealed an investigation into a smuggling network exporting Nvidia GPUs to China, violating U.S. national security laws.  
- The investigation, named "Operation Gatekeeper," uncovered a scheme involving illegal entry, fake companies, and a New Jersey warehouse, attempting to send over $160 million worth of chips.  
- Following arrests, President Trump's announcement to allow the export of Nvidia's H200 GPUs complicated the prosecution's case, raising concerns about ongoing smuggling operations despite new regulations.

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How $160 million worth of export-controlled Nvidia chips were allegedly smuggled into China