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Singaporean authorities are currently investigating Megaspeed, an artificial intelligence computing firm that is a customer of Nvidia, the American AI chip giant. The investigation centers on allegations that Megaspeed potentially aided Chinese companies in circumventing U.S. export restrictions on advanced semiconductors.
“The Singapore Police Force confirms that investigations are ongoing into Megaspeed for suspected breaches of our domestic laws,” the SPF stated in an official email to CNBC.
This probe coincides with a report by *The New York Times* alleging that the U.S. Commerce Department is also investigating Megaspeed for potentially skirting U.S. export controls. The report cited anonymous officials and individuals familiar with the matter.
The dual investigations into Megaspeed raise critical questions about Nvidia’s oversight and adherence to U.S. regulations regarding the sale and tracking of its advanced AI chips destined for China. The compliance of these technologies is vital for national security and technological leadership.
An Nvidia spokesperson stated that the company has been actively engaging with the U.S. government on this issue and has conducted its own internal inquiry. The company asserts that it has not identified “any reason to believe products have been diverted.”
“NVIDIA visited multiple Megaspeed sites yet again earlier this week and confirmed what we previously observed—Megaspeed is running a small commercial cloud, like many other companies throughout the world, as allowed by U.S. export control rules,” the spokesperson stated to CNBC.
Megaspeed and the U.S. Commerce Department have yet to respond to requests for comment on this matter.
According to *The Times*, Megaspeed, which originated as a spin-off from a Chinese gaming corporation in 2023, reportedly acquired nearly $2 billion worth of Nvidia’s most advanced products through its Malaysian subsidiary. This substantial procurement raises red flags given the existing export restrictions.
Export Loopholes and Broader Implications
The Megaspeed case underscores broader and escalating concerns about the effectiveness of U.S. export controls on cutting-edge technologies, especially those related to artificial intelligence. This is particularly relevant regarding Nvidia’s high-performance AI processors, crucial for advanced applications like machine learning and data analytics.
For several years, the U.S. government has restricted the sale of advanced AI chips to China, citing national security concerns. These restrictions are based on fears that these technologies could bolster China’s military capabilities and provide a competitive advantage in the rapidly evolving AI arena.
However, experts and lawmakers have voiced concerns about existing loopholes in these export controls. Furthermore, reports have surfaced indicating the emergence of a significant black market for smuggled Nvidia chips, further complicating efforts to enforce restrictions. This illicit trade undermines the intended strategic objectives of the export policies.
The House Select Committee on China previously questioned Nvidia’s chip shipments to China and Southeast Asia, following reports that the Chinese AI start-up DeepSeek utilized these chips to develop an advanced AI model. This instance highlights how purportedly compliant sales can still lead to the unintended transfer of sensitive technology.
Earlier this year, Singapore initiated an independent investigation into the alleged smuggling of restricted Nvidia chips, which were originally declared as destined for Malaysia. It is suspected these chips were diverted elsewhere, potentially including China. This case underscores the complexity in tracing and verifying the final destination of exported technology.
In response to mounting pressure and the aforementioned cases, Malaysia announced that it will now require permits for all exports and transfers of Nvidia chips, mirroring similar measures in other jurisdictions. This development is intended to enhance the country’s oversight of technology exports and prevent illegal diversion.
Outsourcing Compute: A Legal Gray Area?
Reports suggest that Chinese firms might be exploiting a legal gray area. They are tapping into computing resources from data centers based in Southeast Asia, which are equipped with restricted Nvidia chips. This tactic raises questions about the enforceability of export restrictions when compute resources are accessed remotely, rather than explicitly transferred.
For instance, there are claims that Megaspeed utilized its Nvidia chips in data centers located in Malaysia and Indonesia to remotely serve customers within China. This approach allows Chinese entities to gain access to advanced computing power without directly violating export controls on hardware sales. This practice opens a new front in the debate about technology controls and access.
While declining to address this claim directly, Nvidia’s statement alluded to the importance of maintaining its global market position while adhering to regulations. The Trump administration’s AI Action Plan is aimed at bolstering American innovation and leadership in artificial intelligence while simultaneously safeguarding national security interests. This balance between economic competitiveness and security is central to the ongoing policy debate.
Current and former political leaders have articulated the strategic importance of ensuring that Nvidia maintains its dominant position in the global market, including within China. However, their AI Action Plan also emphasized the need for strengthening export control enforcement on a global scale.
Some policy proposals in Washington include a requirement for Nvidia to embed tracking systems in its chips, offering improved transparency and oversight. These proposals have faced criticism from Beijing, which halted imports of Nvidia chips after the Trump administration initially signaled a reduction in restrictions on certain chips designed specifically for China.
The evolving landscape surrounding technology exports underscores the complex interplay between economic interests, national security and global competition. As the investigations into Megaspeed unfold, the outcome will likely have significant implications for the future of technology policies and the enforcement of export controls.
