In a rare public comment that Nvidia is growing more sensitive to downstream risk, CEO Jensen Huang was quoted by Bloomberg News as saying Super Micro Computer must strengthen internal compliance controls after Taiwanese authorities detained three people accused of smuggling banned AI chips to China.
"Ultimately, Super Micro has to run its own company," Huang told reporters on Saturday in response to the chip smuggling scheme. "I hope that they will enhance and improve their regulation compliance and avoid that from happening in the future."
The U.S.-based server and data-center hardware company primarily builds high-performance servers, storage systems, networking gear, and complete AI/data-center racks for various customers, but most importantly for those working on edge computing and artificial intelligence workloads.
Huang said Nvidia is "rigorously" explaining the complex regulatory environment to all its partners to avert further downstream diversion risk.
Huang's comments stem from federal prosecutors charging the co-founder of Super Micro and two associates with participating in a scheme to divert roughly $2.5 billion in Nvidia AI accelerators to China.
How the Alleged Scheme Worked:
- The group used a company in Southeast Asia as a front buyer to place huge orders with a California-based U.S. manufacturer.
- Once the servers arrived in Southeast Asia, they were quickly repackaged and secretly shipped to customers in China through a network of brokers.
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Our view is that Huang's comments suggest he is trying to insulate Nvidia from a widening chip-smuggling investigation while preserving access to highly scrutinized international markets.