On 7/25/2024, US President Joe Biden’s administration came under fire on Capitol Hill over reports that illicit networks are selling advanced semiconductor chips made by Nvidia to China, evading export controls meant to block such sales.

Citing an investigation by The Wall Street Journal this month that found more than 70 distributors selling restricted Nvidia chips to entities in China, Senator John Kennedy, Republican of Louisiana, confronted Thea Kendler, assistant secretary of commerce for export administration, about the sales. “You’ll find 70 distributors … which will sell Nvidia’s supposedly restricted chips to China,” Kennedy said in a Senate Banking Committee hearing. “And in fact, some of them will sell to China the entire servers. They cost about [US$] 300,000 apiece, they’ve got eight chips in them. Isn’t that a fact?”

Kendler defended Commerce’s work by insisting that “any diversion of our controls would be a matter for export enforcement and we are tracking that very closely”. According to The Journal, the merchants it tracked are selling the restricted Nvidia products, or servers containing the company’s advanced chips, to Chinese AI start-ups or research institutions because the vendors cannot source enough to satisfy the demands of the country’s larger tech companies.

Kendler appealed to the committee for more funding, which she said was needed to enable the Commerce Department’s networks to track circumvention. Kennedy, though, dismissed Kendler’s request, contending that Kendler’s staff only needed an internet connection to conduct the work.

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Kennedy on Advanced AI chips sold to China, 70 distributors, entire servers cost $300K apiece