- Nvidia’s (NVDA) stock fell nearly 7% early Monday after reports confirmed its Blackwell AI chips reached China via third-party resellers, breaching U.S. export controls, with Malaysia identified as a smuggling hub.
- Singapore’s investigation into Nvidia customers Dell Technologies (DELL) – down 4.82% and Super Micro (SMCI) down nearly 10%, after a 28% drop last week – for potential violations in server shipments heightened the fallout, while Arm Holdings (ARM), linked to Nvidia’s Grace CPUs, saw a 5% decline.
- Nvidia vowed to probe and address the diversion, but the incident exposes supply chain vulnerabilities, risking tighter regulations and investor concerns amid U.S.-China tech tensions.
Nvidia’s (NVDA) stock took a hit, dropping nearly 7% in early Monday trading, as the specter of its cutting-edge Blackwell AI chips slipping into China despite stringent U.S. export controls rattled investors. The WSJ revealed that third-party resellers, operating through entities in nearby regions, are funneling these chips into China, circumventing restrictions designed to curb the flow of advanced technology to the country. This breach underscores the persistent challenge of enforcing export policies in a globalized supply chain, where Malaysia has emerged as a key conduit for smuggling, amplifying concerns about Nvidia’s ability to police its distribution network.
The fallout extended beyond Nvidia, with Dell (DELL) and Super Micro Computer (SMCI) – major customers integrating Blackwell GPUs into their servers – facing scrutiny from Singapore authorities for potentially routing shipments through Malaysia in violation of U.S. rules, dragging Dell’s stock down roughly 5% and Super Micro’s by 10%, the latter already reeling from a 28% plunge last week. Nvidia’s reliance on Arm’s architecture for its Grace CPUs, paired with Blackwell GPUs in these server systems, also pulled Arm into the fray, with its shares dipping over 5% as the ripple effects of the smuggling reports spread. An Nvidia spokesperson emphasized to YF that unauthorized diversion of Blackwell products to restricted countries like China is not possible by “anonymous traders” without detection, pledging ongoing investigations and corrective measures, though the complexity of tracking every chip in a sprawling ecosystem remains a formidable hurdle.
The Blackwell chips, pivotal to Nvidia’s dominance in AI computing, represent a technological leap that U.S. policy aims to keep out of rival hands, yet their presence in China highlights gaps in oversight that could invite tighter regulations or penalties. Singapore’s probe into Dell and Super Micro adds another layer of pressure, as both firms are linchpins in deploying Nvidia’s innovations, and any confirmed violations could disrupt their operations and Nvidia’s revenue streams, especially given China’s lucrative market. With export controls tightening under successive U.S. administrations to safeguard national security, Nvidia’s 5% stock slide reflects investor unease not just about immediate losses but also the broader risk of escalating trade tensions and supply chain fragility in the high-stakes AI race.
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