The U.S. government is investigating whether Nvidia's biggest buyer in Southeast Asia has smuggled chips into China. Bloomberg's Ian King discusses the details with Caroline Hyde on "Bloomberg Tech."

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Authorities in Southeast Asia and the United States are investigating Mega Speed, a Singapore-based company and major purchaser of Nvidia GPUs, over concerns about potential smuggling and compliance with export restrictions. The scrutiny follows U.S. government restrictions imposed in 2022 on the export of advanced Nvidia chips to China, which led to increased shipments to other Asian countries.

Both Nvidia and Mega Speed deny any wrongdoing, and Bloomberg's reporting found no evidence of illegal diversion of chips to China. However, investigators remain concerned about the lack of transparency in business relationships and inconsistencies in chip inventory and demand, prompting calls for greater clarity as the situation develops.

Big Nvidia buyer faces smuggling probe

The deep dive that reporters have done to understand whether we really understand how many GPUs are going to make a speed and where they're ending up and talk us through it. Yeah I mean there's a lot of evidence. It's important to point out as you already did that. Nvidia says there's nothing going on here. Mega speed itself says there's nothing going on here. But you know our colleagues reporting here Caroline is that there is an investigation going on. And you know Southeast Asian governments and also Washington are looking at this and still trying to find out whether there has been anything significant going on. Go ahead. Well from what we know it's a Singapore based company. Mega speed operating fully in compliance as they say with applicable laws. But what ultimately has had to spring up ever since the Biden administration back in 2022 was a restriction on sophisticated chips coming from Nvidia to China. So suddenly you saw other Asian countries become real areas of focus for importing chips so that Chinese companies could actually do the workload to do the compute outside of their own country. Correct. Yeah no that's absolutely right. There's nothing illegal with setting up a data center and serving Chinese customers providing those customers don't have links with a banned entity in the U.S. whether that's the military or some company which the U.S. government has decided serves China's military. However there is a suspicion about these links about who's in control of what. There is a you know and this is the problem that Nvidia has to face and Nvidia say look that there's nothing to see here. There's nothing to worry about. But as you'll see from our story there's a lot of links between individuals in China. There are you know there's a lot of a lack of clarity in the relationships which I think everybody is trying to work through to make sure that there is nothing untoward going on. Because Bloomberg didn't find evidence of any mega speed Nvidia chips actually being diverted to China. But there's all these inconsistencies as you say in mega speed Southeast Asia demand and chip inventory and wherever all they all end up in. What's so interesting is this is a moment where maybe actually in video we'll get more access to China. H2 hundreds have in theory or at least according to a truth social post been allowed back into China. The question is whether China wants them but also where the mega speed will actually have Chinese demand going forward if indeed we start to see access once again to mainland. Yeah I mean again we're in a kind of a transition period where we're trying to find out exactly how this will all play out. Nvidia wants to do business directly in China. That's absolutely true at the moment. It cannot do that because of these restrictions. What we're trying to find out is whether the Chinese want to do business directly with Nvidia. And if that's the case what level of demand that they'll be there. Nvidia has really kind of had a good year in Washington. It's gone from really restrictive rules to freeing up of some of them. But again that has to translate into shipments into that Chinese market. And we haven't seen that yet. We don't know that that will actually happen. Clearly stories like this that there are suspicions about smuggling that we perhaps should be more secure or more kind of careful in how we deal with China and Chinese entities don't help that case. So again there's a lot at stake here and we really need a lot more clarity about the details of how this is all going to work out.

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Big Nvidia buyer faces smuggling probe

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