State-run China Telecom found hosting banned Nvidia chips

Israeli security firm Lava has confirmed the presence of 32 Nvidia Blackwell Ultra B300 chips inside the network of China Telecom, a state-owned entity providing telecommunications services across the country.

The discovery highlights a persistent gap in enforcement, as these specific high-performance GPUs are currently barred from export to China by U.S. regulations. Such chips are typically restricted to whitelisted buyers who agree not to transfer them to sanctioned parties, making their appearance in a Chinese data center a significant breach of protocol. Lava identified the hardware using Nvidia’s own DCGM Exporter tool, a monitoring software designed for tracking server health and performance. Although intended for internal use, the tool can often be accessed from outside the data center’s network and does not always require password authentication, leaving a potential blind spot in security.

Nvidia has largely downplayed the significance of the finding, describing the incident as a minor anomaly rather than a systemic failure. A spokesperson for the chipmaker stated that recent court cases show the diversion of controlled U.S. products is less than half of one percent, characterizing it as a drop in the bucket compared to the vast amount of domestic compute power China already possesses. The company maintained that with tens of millions of GPUs in service in approved countries, smuggling remains a non-factor that is effectively managed by governments on both sides of the Pacific.

The Blackwell Ultra B300 is a highly sought-after component, announced in March of last year as one of the most powerful data center GPUs available. It offers substantial performance improvements over the previous-generation B200, including 50% more memory and enhanced FP4 compute capabilities. Nvidia originally marketed the chip as being built for the age of reasoning, citing its suitability for sophisticated large language models like DeepSeek R1. The chip was expected to ship by the end of 2025, quickly becoming a prime target for those seeking to bolster AI infrastructure.

Recent legal actions underscore the intensity of the smuggling trade. In August 2026, nine individuals were indicted in Taiwan for the illegal export of B300 GPUs to China, following an investigation that led Supermicro to fire several employees. The complex scheme allegedly involved a Taiwanese server trading firm with whitelisted status, known as Flying Tiget Tech. This latest incident follows reports from 2025 indicating that Chinese companies smuggled $1 billion worth of Nvidia AI chips into the country in just three months, primarily targeting the B200 series before the B300 became available.

The high demand for Nvidia silicon has driven up prices for older models, with A100 servers tripling in value despite being five years old and costing up to $82,000. As the crackdown on new chip smuggling continues, some operators have resorted to retooling gaming GPUs for AI workloads. While it remains unclear exactly how the B300s reached China Telecom’s server racks, the incident confirms that export controls face ongoing challenges in the race to secure advanced AI hardware.