State telecom runs 32 US-restricted Nvidia chips in network

U.S. export controls intended to limit the flow of advanced chips to China appear to have been breached within a major state-owned telecom network. Israeli security firm Lava reported on October 23 that it identified 32 Nvidia Blackwell Ultra B300 processors operating inside the systems of China Telecom. The discovery adds to growing scrutiny of how high-performance hardware reaches Chinese data centers despite regulatory restrictions.

The B300 chips are currently restricted under U.S. rules, which allow sales only to specific whitelisted buyers who agree not to resell to sanctioned parties. The presence of these units in China Telecom's infrastructure suggests that enforcement mechanisms face practical challenges. A 2025 report indicated that Chinese firms smuggled $1 billion in Nvidia AI chips over a three-month period, with B200 models being the primary target at the time. Distributors were already preparing for the arrival of the more advanced B300 series.

Nvidia did not contest the technical findings but characterized the incident as a minor exception in a larger market. A company spokesperson stated that recent court cases show diversion rates of less than 0.5%, describing this as a small fraction compared to China's existing domestic computing power. The spokesperson argued that with tens of millions of GPUs in service in approved countries, the findings demonstrate that smuggling remains a manageable issue.

The exact path the chips took to reach China Telecom is not yet known. Lava detected the hardware using Nvidia's DCGM Exporter, a monitoring tool designed for internal server health checks. The software is often accessible from outside the data center network and does not always require a password, allowing external researchers to identify the hardware. Nvidia has acknowledged it is developing a new tool to help locate its chips, but that software has not yet been released.

The B300 offers 50% more memory and FP4 compute capability than the previous B200 model. Nvidia launched the chip in March 2025, positioning it for complex large language model workloads. The high demand for the hardware has driven up prices across the market, with servers based on the five-year-old A100 chip seeing triple their original cost. Some buyers have started retooling gaming GPUs to handle AI tasks as a workaround for supply constraints.

Enforcement efforts have intensified in response to the leak. In August 2026, nine individuals in Taiwan were indicted for illegally exporting B300 GPUs to China. The indictments followed an investigation by Supermicro, which fired several employees after identifying a smuggling scheme. The plan involved a Taiwanese trading firm called Flying Tiget Tech, which held the necessary whitelisted status to purchase the GPUs.

The findings from Lava rely on standard monitoring software that data center operators install to track performance. The tool's external accessibility allowed the security firm to pinpoint the specific chip models in use. While Nvidia continues to refine its tracking capabilities, the current detection method remains a viable way for researchers to audit hardware in foreign networks.