State-owned China Telecom Runs 32 Nvidia Chips Barred by U.S. Law

Chinese state-owned telecommunications provider China Telecom is operating 32 Nvidia Blackwell Ultra B300 chips, according to Israeli security firm Lava. The detection occurred within the company's internal network, despite U.S. export rules that prohibit the sale of this specific hardware class to China.

The discovery was first reported by The Information. Under current regulations, these chips are limited to whitelisted buyers who must agree not to transfer them to sanctioned parties. Enforcement has proven difficult in practice. A 2025 report indicated that Chinese firms smuggled $1 billion worth of Nvidia AI chips over a three-month period. At that time, B200 processors were the primary target, though distributors were already preparing for the B300 series.

Nvidia acknowledged the findings but minimized the scale of the issue. A spokesperson told Tom's Hardware that the diversion represents less than half of one percent of controlled products in recent court cases. The company argued that this amount is a small fraction compared to the vast domestic compute capacity China already possesses. With tens of millions of GPUs in approved countries, Nvidia stated that smuggling is a minor factor blocked by governments on both sides of the trade.

The exact method used to move the chips into China Telecom's infrastructure remains unclear. Lava could not pinpoint the specific location within the network where the hardware resides. The firm identified the units using Nvidia's DCGM Exporter, a monitoring tool intended for internal server health checks. This software is often accessible from outside the data center and does not always require a password. Nvidia is developing a dedicated tool to locate its chips, but that software has not yet launched.

The B300 was announced in March 2025 and offers 50% more memory and FP4 compute power than the previous B200 model. Nvidia described the chip as built for the age of reasoning, citing support for advanced models like DeepSeek R1. The processor was expected to ship by late 2025 and became a high-demand item in the market.

Regulatory bodies have recently stepped up enforcement. In August 2026, nine individuals in Taiwan were indicted for illegally exporting B300 GPUs to China. These indictments followed an internal investigation by Supermicro, which fired several employees related to the smuggling scheme. The operation involved a Taiwanese server trading firm named Flying Tiget Tech that held whitelisted status for GPU purchases.

High demand for Nvidia silicon is driving up prices for older hardware as well. Servers based on the five-year-old A100 chip have tripled in cost. Some buyers have reportedly modified gaming GPUs to handle AI workloads as they navigate the ongoing crackdown on unauthorized transfers.