Federal prosecutors in Texas have unveiled an investigation into a sophisticated, globe-spanning smuggling network, code-named “Operation Gatekeeper.” This isn’t about contraband or illicit substances; the focus is on a clandestine operation allegedly funneling Nvidia’s high-demand graphics processing units (GPUs) to China. These chips are the critical engines powering the artificial intelligence revolution, with implications for both military and economic dominance.
The unearthed documents reveal a systematic effort to circumvent U.S. national security export controls. The alleged network involved individuals illegally entering the U.S., the establishment of shell corporations, and a covert shipping operation in New Jersey. An undercover agent reportedly infiltrated a warehouse where Nvidia GPUs were allegedly being relabeled with the branding of a fake company, “Sandkayan,” to mask their origin and destination. Shipping and export documentation purportedly misclassified these advanced chips as mere “adapters” or “modules.”
This federal sting operation highlights the intensifying technological competition between the United States and China, particularly concerning access to cutting-edge semiconductor technology that many foresee as a key determinant of future global economic power. Prosecutors stated that the smuggling ring attempted to export at least $160 million worth of Nvidia’s H100 and H200 GPUs to China between October 2024 and May 2025.
The demand for these specialized chips from China remains substantial, despite the country’s efforts to develop its domestic AI chip industry. China is still heavily reliant on Nvidia’s technological prowess. Ray Wang, an analyst at SemiAnalysis, notes, “I think more than 60% of the leading AI models in China are currently using Nvidia’s hardware. Nvidia has a systematic advantage ranging from hardware to software. And I think for now, if you combine those two factors together, it’s still something that China is trying to catch up to.”
The operation reached a climax on May 28 at the New Jersey warehouse. As three trucks arrived to collect the alleged contraband, a message within a conspirators’ text chain reportedly indicated that law enforcement had appeared on the scene, inquiring about the cargo. The response, according to prosecutors, was to instruct the drivers to profess ignorance. Minutes later, a message urged the group to “Dissolve this group chat. Delete everyone.” Shortly thereafter, federal agents moved in, securing the high-tech equipment and thwarting its shipment to China.
This bust occurs amidst a series of similar seizures involving unauthorized Nvidia exports to China in recent months. The Center for a New American Security estimates that between 10,000 and several hundred thousand AI chips may have been smuggled to China in 2024 alone. “In today’s world, I feel there are so many ways that you can get your hand on Nvidia’s chips in all kinds of illegal ways,” Wang commented. “You can set up your data center globally, you can have shell companies to purchase Nvidia chips. And it’s so hard for Nvidia to track and do due diligence.”
A Nvidia spokesperson emphasized the rigorous nature of U.S. export controls. “Even sales of older generation products on the secondary market are subject to strict scrutiny and review,” the spokesperson stated. “While millions of controlled GPUs are in service at businesses, homes, and schools, we will continue to work with the government and our customers to ensure that second-hand smuggling does not occur.”
However, the investigation’s announcement was immediately followed by a social media post from President Donald Trump that could complicate the government’s case. Trump indicated that the U.S. would now permit the export of Nvidia’s H200 GPUs to China, provided the U.S. received a 25% share of the sales. He clarified that Nvidia’s most advanced Blackwell and Rubin GPUs would remain restricted for export.
Operation Gatekeeper led to the arrest of two businessmen and a guilty plea from a Houston man and his company for smuggling advanced AI technology. However, the presidential announcement has created a challenge for prosecutors aiming to establish that smuggling these specific chips poses a national security risk. Defense attorneys for the accused have seized on this development, arguing in court filings that the President’s statement directly contradicts the government’s claims about the danger posed by such exports.
Some industry observers believe that the flow of high-end AI chips to China will persist. “I don’t believe the smuggling will just stop,” Wang posited. “It is unclear to me that the new opening of the H200 chips will be enough for Chinese AI demand. The compute demand we are seeing globally has been accelerating, and I believe that should be the case in China as well.”
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