Chinese Vendors Bypass US Embargo to Supply High-end Nvidia A100 AI Chips: Report Reveals Hidden Market Dynamics

China's famed Huaqiangbei electronics area in the southern Chinese city of Shenzhen shows startling revelations regarding the availability of Nvidia Corp NVDA AI chips.

The U.S. embargo has led to an underground market with vendors dodging scrutiny from either U.S. or Chinese authorities, Reuters reports.

The SEG Plaza skyscraper's first ten floors are crammed with shops selling everything from camera parts to drones.

Two Chinese vendors in the southern Chinese city of Shenzhen claimed they could provide small numbers of A100 artificial intelligence chips made by Nvidia, pricing them at double the usual price to $20,000 apiece.

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Reuters spoke with ten vendors in Hong Kong and mainland China who described being able to procure small numbers of A100s easily.

The vendors said that AI chip buyers are typically app developers, startups, researchers, or gamers. One vendor said buyers also included Chinese local authorities.

Nvidia stated that it did not allow the A100 or H100 exports to China.

The Chinese vendors said they procured the chips by grabbing the excess stock after Nvidia shipped large quantities to big U.S. firms or importing through companies locally incorporated in places like India, Taiwan, and Singapore.

A model similar to OpenAI's GPT would require over 30,000 Nvidia A100 cards, according to TrendForce. But a handful can run complex machine-learning tasks and enhance existing AI models.

Some vendors cautioned against fraud with refurbished chips passed off as A100s.

The U.S. is likely to be indifferent to small transactions of the chips lest China poses a more significant threat, as per Charlie Chai, a Shanghai-based analyst at 86Research. 

Also, the premiums currently charged by Chinese vendors for A100 and H100 chips could collapse as many of the Chinese AI startups driving purchases would eventually withdraw from the market.

Price Action: NVDA shares traded higher by 0.18% at $427.70 premarket on the last check Tuesday.

Photo by Mizter_X94 via Pixabay