U.S. asks Malaysia to 'monitor every shipment' to close the flow of restricted GPUs to China

Ever since the U.S. government restricted sales of advanced AI and HPC processors to China, Chinese entities have used various loopholes to acquire Nvidia's GPUs. Smuggling GPUs from nearby countries to China was one of the easiest ways to get the desired processors, but it looks like it is not going to be that easy anymore: Singapore is cracking down on at least some smugglers, and now Malaysia is tightening oversight of its high-tech exports to China, reports the Financial Times.

Malaysia is reportedly preparing stricter rules for its high-tech sector due to U.S. concerns that advanced processors are being funneled to China, violating American export laws. The United States has asked Malaysia to carefully follow the path of high-performance Nvidia processors entering the country. U.S. officials suspect that many of these chips are being routed to China, bypassing export limits meant to curb Chinese progress in AI and military capabilities. Malaysia formed a task force to tighten oversight, with particular focus on Nvidia hardware used for training of advanced large language models.

Malaysia's trade minister, Zafrul Aziz, said the request came directly from Washington. He confirmed that a joint task force, including digital minister Gobind Singh Deo, had been created to strengthen oversight of the local datacenter industry, which depends on Nvidia's hardware.

Zafrul explained that the U.S. wants guarantees that the GPUs are installed in the local datacenters and not redirected elsewhere, specifically to China. He said the U.S. is also urging manufacturers and others in the supply chain to share responsibility for ensuring Nvidia processors reach approved destinations.

Unlike Singapore, Malaysia is not a major hub of Nvidia GPUs sales, but it looks like the U.S. does not want to give smugglers any chances. Singapore has become increasingly important to Nvidia’s global operations, contributing 18.14% of its revenue in the fiscal year 2025. This is a sharp increase from 8.5% in the fiscal year 2024, when major restrictions on selling AI GPUs to Chinese buyers were first implemented. Despite the surge, Nvidia states that most of these Singapore-related transactions involve goods being shipped to destinations other than China. The company explains that its revenue figures are based on the location to which customers are billed, which does not necessarily indicate where the products are ultimately used.

Malaysia has recently seen rapid growth in its datacenter industry, especially in Johor state. In the past year and a half, over $25 billion in investment has flowed into the region from companies including Nvidia, Microsoft, and ByteDance.