🧠 Food for thought

Implications, context, and why it matters.

The AI chip black market has grown into a multi-billion dollar business

• High prices for Nvidia chips stem from a crackdown on large smuggling networks rather than small resellers 1.
• In a 2024-2025 scheme, three people tied to server maker Super Micro Computer, Inc. (SMCI) allegedly used a Southeast Asia pass-through company to buy about US$2.5 billion in servers 2.
• Within weeks in mid-2025, at least US$510 million of those servers allegedly ended up in China 2.
• Smugglers routed shipments through Southeast Asian middlemen and set up thousands of non-working “dummy” servers to mislead auditors and US inspectors 2.

Nvidia still commands a premium as China builds local options

• Chinese tech firms pay steep markups because local chips still cannot train the largest AI models. That helps explain why 319 of 321 major models tracked were trained on US hardware 3.
• US export controls sped up China’s push for self-reliance. Domestic suppliers now hold 41% of China’s AI server market, up from Nvidia’s claimed 95% peak in 2022 4.
• Huawei and Baidu are building hardware and software systems to compete with Nvidia’s CUDA, the company’s software platform for AI computing. Together they made up more than 70% of China’s “GPU cloud” market, or cloud services built on home-grown graphics processing units, in the first half of 2025 5.