Update Aug 14 6:30 am ET: The opening of this story has been updated following a statement from Nvidia in response to accusations of chip tracking levelled at the Federal government.
Nvidia has issued a flat denial of the existence of tracking chips in its hardware, following reports that the Federal Government allegedly placed tracking devices in shipments of AI server tech thought to be at risk of diversion to China. Earlier this week, Reuters reported that anonymous sources claim U.S. authorities are employing this tactic as part of their investigation into the alleged smuggling of banned AI chips into China. In a statement to Tom's Hardware, an Nvidia spokesperson simply stated, "We don't install secret tracking devices in our products." While the story in question lays the tracking at the feet of Washington, rather than any companies whose products are involved, Nvidia's staunch denail reflects a desire to distance itself from reports as it prepares to resume selling H20 chips in China.
According to the report, the alleged tracking doesn't impact all shipments, but only "targeted" shipments believed to be at a high risk of being diverted to China. Despite the affordability and ubiquity of trackers, it will be prohibitively expensive to place several in all servers that are going through customs. It’s more likely that the authorities are allegedly doing this to aid in a specific investigation. Although placing a tracker on a package typically requires a court order, Reuters notes that export enforcement agents may sometimes do so with administrative approval only.
It’s unclear when this alleged practice started for semiconductors, but those involved in the AI chip supply chain seem aware of these actions. These trackers are reportedly often added to the shipping containers, the packaging of individual servers, or even within the server racks themselves. The report cites individuals who claim that they had seen images and videos of trackers being removed from Dell and Super Micro servers, some of them as large as smartphones.
Smugglers also apparently know this, with court documents in a recent case of smuggling millions of dollars' worth of chips to China revealing that a suspect instructed their co-conspirators to “pay attention to see if there is a tracker on it.”
The U.S. Department of Commerce, Homeland Security, and the FBI didn’t issue a statement when asked by Reuters, although the sources confirm that these agencies are typically involved in these situations.
Nvidia CEO Jensen Huang has consistently denied that the company’s most advanced AI chips are being diverted to China. However, multiple outlets confirm that there’s a strong black market for these cutting-edge silicon, with a reported billion dollars’ worth of Nvidia products being openly traded into the East Asian country in just the last quarter.
Washington is trying to hamper China’s progress in AI, especially as it’s considered a ‘dual-use technology’ that is applicable in both civilian and military purposes. Because of this, the White House — across multiple administrations — has applied export controls on state-of-the-art semiconductors, including the most powerful AI chips from Nvidia and AMD. However, Huang has said that the U.S. export control was a failure, with the former U.S. Commerce Secretary also saying that holding back China’s chipmaking progress is a fool’s errand.
Despite that, the Trump administration has doubled down on its efforts to control the flow of AI chips into China, even going as far as banning both the Nvidia H20 and the AMD MI308 in April 2025 — AI chips that have been especially designed to comply with the initial set of export controls released by the Federal government.
The U.S. has since backed down on this particular export control and has reopened the taps for these AI chips; the newer, more powerful variants of these semiconductors still aren’t allowed to be shipped to China. In the most recent twist in the saga, AMD and Nvidia have struck a deal to share 15% of related sales revenue with the government in exchange for export licenses for its H20 and MI308, an unprecedented arrangement.
The U.S. has been clamping down on the alleged smuggling of high-end semiconductors. American allies such as Singapore are taking action to stop the flow of these AI chips through their borders. Furthermore, a bill has been filed in Congress to force American AI chip makers to add geo-tracking technology into their products. Nvidia is against this, though, saying that these ‘permanent flaws’ would make their devices vulnerable to hackers. These developments have nonetheless led the Chinese government to question the integrity of the company’s chips and have even discouraged their use.
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