Security Firm Exposes Smuggled Blackwell Chips Inside China Telecom Network

Israeli cybersecurity firm Lava has revealed the presence of 32 Nvidia Blackwell Ultra B300 graphics processing units within the infrastructure of China Telecom, a major state-owned telecommunications provider. The discovery, reported by The Information, highlights a significant breach in U.S. export controls, as the B300 chips were officially barred from sale to Chinese entities. These high-performance components are restricted to whitelisted buyers who agree not to sell them to sanctioned parties, making their appearance in a Chinese data center a notable logistical puzzle.

The identification of these specific chips was achieved through Nvidia’s DCGM Exporter tool, a software utility designed for data center operators to monitor server health and performance. Although intended for internal use, the tool can sometimes be accessed from outside the local network and frequently does not require password authentication. While Lava confirmed the chips are present, the specific location within China Telecom's network remains unconfirmed, as does the precise method used to smuggle them into the server racks.

Nvidia has responded to the findings by downplaying their strategic impact, suggesting that such incidents are rare relative to the total volume of hardware in approved markets. A spokesperson for the chipmaker stated that recent court cases have shown the diversion of controlled U.S. products to be less than half of one percent, describing it as "a drop in the bucket compared to the ocean of domestic compute China already has." The company insists that with tens of millions of GPUs in service globally, smuggling remains a non-factor that is effectively managed by governments on both sides of the Pacific.

The B300 series has become a target for smuggling due to its superior specifications, including 50% more memory and FP4 compute capability than the previous-generation B200. Announced in March 2025 as a chip "built for the age of reasoning" to support advanced AI models, the B300 quickly became a commodity of high demand. This surge in interest has led to complex smuggling operations, such as the recent indictment of nine individuals in Taiwan for illegally exporting these GPUs. The scheme involved a whitelisted server trading firm and resulted in the dismissal of several employees at Supermicro following an internal investigation.

This latest discovery follows a trend of significant illicit trade, with reports in 2025 indicating that $1 billion worth of Nvidia AI chips were smuggled into China in just three months. The high value of these accelerators has even driven up the price of older hardware, with five-year-old A100 servers tripling in cost to reach up to $82,000. As the crackdown on smuggling continues, some buyers are resorting to retooling gaming GPUs for AI workloads, underscoring the intense pressure to secure Nvidia’s silicon for competitive advantage.