The U.S. Department of Commerce has reportedly asked Nvidia (NVDA) to investigate how its AI chips ended up in China over the past year despite strict export restrictions, according to The Information. Nvidia has turned to major distributors like Super Micro Computer (SMCI) and Dell Technologies (DELL) to conduct spot checks on customers in Southeast Asia, where servers with Nvidia chips are being sold.
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The Information claims that some individuals involved in smuggling Nvidia chips have evaded recent inspections. Techniques reportedly include duplicating serial numbers from Nvidia-equipped servers purchased from Super Micro and attaching them to unauthorized servers. In other cases, smugglers altered the serial numbers within the operating systems to avoid detection.
The Biden administration has intensified its crackdown on chip exports to China by expanding bans on high-end AI chips in 2023 and recently restricting semiconductor sales to 140 companies. Despite these efforts, Chinese universities and research institutes have managed to acquire Nvidia chips through resellers, which shows just how difficult it is to enforce these export controls.
A Victim of Its Own Success
With Nvidia firing on all cylinders by producing products that are crucial to the development of AI, it seems to be caught up in regulatory issues on both sides of the Pacific. Indeed, adding to Nvidia’s current list of problems, China recently launched an antitrust probe into its $7 billion acquisition of Mellanox, which, when combined with fears of a slowdown in AI spending, has led to a recent pullback in share prices. Nevertheless, analysts remain bullish on the company.
Is NVDA a Good Stock to Buy?
In fact, Wall Street has a Strong Buy consensus rating based on 37 Buys and three Holds assigned in the past three months. After a 175% rally in its share price over the past year, the average NVDA price target of $177.14 per share implies an upside potential of 33.8% from current levels.
