TLDR
- US Representative Bill Foster plans legislation to verify location of Nvidia AI chips after sale
- The bill aims to address widespread smuggling of Nvidia chips into China despite export controls
- China generated $17 billion (13% of total sales) for Nvidia in their last fiscal year
- Foster’s bill has bipartisan support from Democrats and Republicans
- Technology to track chip locations already exists but isn’t widely implemented
Nvidia shares fell in premarket trading Tuesday following news that US lawmakers are preparing legislation to track the company’s AI chips after they’re sold. The bill, expected in coming weeks from Democratic Representative Bill Foster of Illinois, aims to crack down on widespread smuggling of high-performance AI chips into China.
Foster’s legislation would direct US regulators to develop rules for two key areas: tracking chips to verify their location under export control licenses and preventing chips from booting up if they aren’t properly licensed.
The effort comes after both the Trump and Biden administrations implemented increasingly tight export controls on Nvidia’s chips to China. Despite these restrictions, reports indicate smuggling continues on a large scale.
“This is not an imaginary future problem,” Foster told Reuters. “It is a problem now.”
China represented a substantial market for Nvidia, generating $17 billion in revenue (13% of total sales) in the company’s last fiscal year that ended January 26.
Why Location Tracking Matters
The smuggling issue has taken on new urgency following the emergence of China’s DeepSeek AI system, which reportedly uses prohibited Nvidia chips and poses strong competition to US systems.
Foster, who worked as a particle physicist and designed computer chips during his scientific career, believes the technology to track chips is readily available. Much of it is already built into Nvidia’s hardware, according to independent technical experts.
The tracking technology would rely on chips communicating with a secured server that uses signal travel time to verify location, based on the principle that computer signals move at the speed of light.
Google already tracks the location of its in-house AI chips and others in its data centers for security purposes, according to sources with direct knowledge of its operations.
Foster’s legislation would give the US Department of Commerce six months to develop regulations requiring this technology.
Nvidia declined to comment on the proposed legislation.
The bill has support from fellow Democrats including Representative Raja Krishnamoorthi, the ranking member on the House Select Committee on China. Republicans are also supportive of the concept, though none have officially signed on yet as the legislation hasn’t been introduced.
“The Select Committee has strong bipartisan support for requiring companies like Nvidia to build location-tracking into their high-powered AI chips and the technology to do it already exists,” Representative John Moolenaar, who chairs the committee, told Reuters.
Tim Fist, a former engineer and director of emerging technology policy at the Institute for Progress think tank, said such tracking would provide country-level location information for chips. While not precise, this would give the Bureau of Industry and Security more information than it currently has about potentially smuggled chips.
The second part of Foster’s legislationâpreventing AI chips from booting up without proper export licensesâwould be more technologically complex but is part of the lawmaker’s broader effort to control advanced technology exports.
Nvidia shares were trading lower in premarket US trading on Tuesday following the news.
Prosecutors in Singapore have already charged three people, including one Chinese national, with fraud in a case that involved servers potentially containing Nvidia chips.
The proposed legislation represents the latest chapter in ongoing US efforts to maintain technological advantage over China, particularly in artificial intelligence development.
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