Federal prosecutors have charged a California man with illegally shipping NVIDIA artificial intelligence chips to China, according to a Bloomberg report published Oct. 2. The case adds to mounting evidence that restricted AI hardware continues to reach Chinese buyers despite US export controls.

The Justice Department announced the arrest of Greg Lui on Oct. 1. Prosecutors accuse him of smuggling servers containing $300 million worth of AI chips to China in violation of US export laws.

The case traces back to earlier evidence released this year: surveillance video showing a person using a red hair dryer to peel serial number stickers off NVIDIA server boxes.

What NVIDIA Overlooked

Government officials told Bloomberg in a feature published Oct. 1 that NVIDIA is not doing enough to stop the trade. NVIDIA has never been accused of helping smugglers, and the company says it has followed the rules.

One warning sign stood out. Thailand and Singapore, both bordering or near China, were receiving more chips than they could use. Daniel Remler, a former State Department AI policy head, said he never received a straight answer to a simple question: how could so many chips flow to Southeast Asia if they were not serving Chinese customers?

The numbers are large. Bloomberg reported that operators in western China were building dozens of data centers able to house 115,000 restricted NVIDIA processors. US officials now believe China has smuggled at least that many chips, according to Bloomberg's sources.

The Super Micro and OBON Allegations

The accused collaborators in one case include Yih-Shyan Liaw, a co-founder of Super Micro. They allegedly sold roughly $2.5 billion worth of AI servers to OBON, a Bangkok-based company that claimed to be building AI infrastructure in Thailand.

The servers instead went straight to end users in China. To evade compliance officers, the conspirators allegedly peeled stickers from genuine NVIDIA products with a hair dryer and attached them to dummy servers, according to prosecutors.

Officials told Bloomberg that NVIDIA should have caught a basic inconsistency. OBON lacked the 100 megawatts of data center space needed to host that many servers. Thailand has only a few hundred megawatts of AI data center capacity running. A build of that scale would have drawn attention.

NVIDIA's Response

NVIDIA disputes that assessment. A spokesperson said a startup's growth plan in a friendly country is an opportunity for America, not a red flag.

The spokesperson said NVIDIA-powered servers are financeable assets that help startups secure capital and infrastructure, including data center space. American companies, the spokesperson added, honor US laws as written.

The company also pointed to Huawei's progress in AI chips. Chinese buyers, NVIDIA argued, have no need to smuggle in NVIDIA hardware when a domestic alternative exists.

The enforcement pressure comes as NVIDIA CEO Jensen Huang lobbies US officials to ease export curbs on China and other Asian nations. Last year, the Trump administration agreed to allow sales of NVIDIA's previous-generation Hopper H200 accelerators to China.

The Lui case and the OBON allegations will test how much responsibility regulators expect from chipmakers when their products move through third countries in volumes that exceed local demand.