State-owned Chinese network runs 32 banned Nvidia processors

A state-owned Chinese telecommunications provider is running 32 Nvidia B300 chips that U.S. export controls prohibit from entering the country. Israeli security firm Lava discovered the hardware inside the network of China Telecom. The finding was first reported by The Information on October 23, 2026. Current rules allow this class of processor to be sold only to approved buyers. Those buyers must agree not to pass the chips to sanctioned parties, including entities in China.

The B300 offers 50 percent more memory and FP4 compute capacity than the older B200 model. Nvidia introduced the data center GPU in March 2025. The company described the chip as built for the age of reasoning, citing sophisticated large language models like DeepSeek R1. High demand has driven up prices across the market. Servers built around the five-year-old A100 have tripled in cost. Some buyers have reportedly modified gaming GPUs to handle AI workloads amid the crackdown.

Lava detected the 32 chips using Nvidia's DCGM Exporter tool. Data center operators install this software to monitor server health. The tool is designed for internal use but can often be accessed from outside the network. It does not always require a password. Nvidia has confirmed it is developing a tool to locate its chips but has not yet released the software. Lava could not determine exactly where in China Telecom's infrastructure the chips are located.

Nvidia did not dispute the findings but downplayed their scale. A spokesperson told Tom's Hardware that recent court cases show insignificant diversion of controlled U.S. products. The company noted that diversion rates were less than half of one percent in those cases. The spokesperson stated this figure is a drop in the bucket compared to the ocean of domestic compute China already possesses. With tens of millions of GPUs in service in approved countries, the company said smuggling is a nonfactor blocked by governments on both sides of the globe.

Enforcing export limits has proved difficult. A 2025 report said Chinese companies smuggled in $1 billion worth of Nvidia AI chips over three months. B200 processors were the most sought at that time, though distributors were already preparing for B300-series parts. In August 2026, nine people were indicted in Taiwan for illegally exporting B300 GPUs to China. These indictments came days after Supermicro fired several employees following a smuggling investigation. The scheme involved a Taiwanese server trading firm called Flying Tiget Tech, which held whitelisted status for GPU purchases.