U.S. Closes Loophole Letting Chinese AI Firms Access Banned Nvidia Chips
Key Points
- Moonshot AI accessed Nvidia GB300 chips through a Thai data center facility in July, White House official Michael Kratsios reported.
- Chinese firms including ByteDance, Alibaba, and Tencent have remotely accessed Nvidia compute via cloud providers in Thailand, Malaysia, and Japan.
- U.S. export control regime currently controls physical AI chips but does not cover remote access to those chips, according to Cassia King of the Institute for AI Policy and Strategy.
Chinese hyperscalers including ByteDance, Alibaba and Tencent have reportedly accessed Nvidia compute power remotely via data centers in Thailand, Malaysia and Japan. ByteDance worked with Singapore-headquartered Aolani, a cloud provider with Nvidia chips, to access compute in Malaysia, according to a source familiar with the arrangement. The Wall Street Journal first reported the ByteDance-Aolani arrangement in March. Aolani told CNBC that "the companies we service do not have ownership, potential future claim or physical access to the chips that power our solutions" and that any access is "fully compliant with all applicable regulations."
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The loophole has accelerated Chinese AI development at a critical moment. DeepSeek and Alibaba have recently released new AI systems that scored well on performance benchmarks, joining Moonshot in advancing the capabilities of Chinese large language models. Industry watchers say access to advanced compute via overseas cloud providers is a key factor in Chinese AI models gaining capability.
Southeast Asia's data center infrastructure is expanding rapidly to meet this demand. Real estate company JLL estimates that global data center capacity could roughly double to 200GW by 2030. According to DC Byte data, 31 planned 100MW+ data centers are set to be built across Malaysia, Indonesia and Thailand, compared to just 2 today. This buildout reflects regional recognition that advanced AI infrastructure represents a growing market.
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Michelle Nie, a visiting fellow in technology and national security at think tank Center for a New American Security, characterized the loophole as "threatening U.S. national security." She told CNBC: "The point of chip export controls is to deny China the ability to train frontier AI using advanced U.S. chips."
When asked about Chinese firms accessing Nvidia compute overseas, a White House official told CNBC: "The Trump administration has implemented the most rigorous export control regime in modern history, and remains committed to safeguarding America's national and economic security." U.S. legislation is being discussed to plug the loophole, but hurdles remain before it can have an impact. The Department of Commerce and Bureau of Industry and Security did not respond to requests for comment.
The gap between physical export controls and remote access represents the most significant vulnerability in U.S. AI chip restrictions. While Nvidia maintains an effective monopoly over the most powerful chips, making export controls a central tool in Washington's strategy, that monopoly provides little protection when the hardware remains accessible to competitors across borders via cloud rental arrangements. As Chinese AI capabilities advance through overseas compute access and Southeast Asian data center capacity multiplies, the urgency of closing this loophole will only intensify.
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What This Means
U.S. policymakers will likely move toward legislation restricting remote access to advanced AI chips regardless of physical location, but enforcement will prove difficult given the distributed nature of cloud infrastructure. Chinese companies may respond by building or acquiring data centers in non-aligned nations or accelerating development of domestic chip alternatives, extending the timeline for effective restrictions.
Sources: CNBC and other international news outlets.
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