Restricted AI Chips Found Inside China Telecom's Network

Israeli security firm Lava reported on October 23 that it has identified 32 restricted Nvidia Blackwell Ultra B300 graphics processors located within the network of China Telecom, a state-owned telecommunications provider. These specific chips are subject to strict U.S. export controls, which prohibit their sale to unapproved buyers and bar their distribution to sanctioned parties, including those in China. The discovery raises immediate questions regarding how these units were acquired and installed inside a Chinese data center.

While the identification of these specific units is new, the movement of restricted hardware into China is not a recent development. In 2025, reports indicated that Chinese companies smuggled approximately $1 billion worth of Nvidia AI chips into the country over a three-month period. At that time, B200 chips were the primary target for buyers, though distributors were already preparing to sell B300-series chips once they became available.

Nvidia has responded to the finding by downplaying the significance of the diversion, though the company did not deny the presence of the chips in China Telecom's infrastructure. A spokesperson for Nvidia stated that investigations by governments and researchers consistently find an insignificant amount of diversion, noting that such cases represent less than one half of one percent. The spokesperson characterized smuggling as a nonfactor compared to the volume of compute already available to China, stating, "With tens of millions of GPUs in service in approved countries, this report again demonstrates that smuggling is a nonfactor, blocked by governments on both sides of the globe."

The method by which these processors entered China Telecom's server racks remains unknown, and Lava has not confirmed the specific location of the chips within the company's network. However, Lava was able to identify them using Nvidia's own DCGM Exporter tool. This software, intended for data center operators to monitor server health and performance, is designed for internal use but can often be accessed externally. In some instances, the tool does not require password authentication.

The desire for the Blackwell Ultra B300 is driven by the hardware's capabilities. Announced in March of last year, the data center GPU delivers significant performance gains over the previous-generation B200, including 50 percent more memory and FP4 compute. At the time, Nvidia described the chip as "built for the age of reasoning" and referenced its utility for advanced AI models like DeepSeek R1. The hardware was scheduled to ship by the end of 2025 and quickly became a high-demand item.

Efforts to secure this hardware have led to legal action. In August 2026, nine people were indicted in Taiwan over the illegal export of B300 GPUs to China. This followed an investigation into smuggling that resulted in Supermicro firing several employees. That case involved a Taiwanese server trading firm, Flying Tiget Tech, which holds whitelisted status for GPU purchases.

Demand for Nvidia's silicon remains high enough to drive prices upward, even for older equipment. The company's five-year-old A100 servers have tripled in price and can cost up to $82,000. The enforcement actions against chip smuggling have also influenced how some operate, with some resorting to retooling gaming GPUs to run AI workloads.