Senators Jim Banks and Elizabeth Warren have jointly written a letter to Commerce Secretary Howard Lutnick, urging him to take immediate action on the diversion of American AI chips to China. The bipartisan call comes days after federal prosecutors unsealed an indictment against three individuals linked to an alleged scheme to route billions in restricted technology to Chinese customers.
Three Supermicro employees, including co-founder Yih-Shyan "Wally" Liaw, have been charged with smuggling $2.5 billion worth of Nvidia hardware to China. A Southeast Asian company, acting as a middleman, compiled fake paperwork to appear as if it would be using the servers and had a separate logistics firm repackage the servers to conceal them before going to China. Prosecutors documented individuals using hair dryers to remove labels and add labels and serial number stickers to the boxes and dummy servers.
The senators urged "the immediate pausing, suspension, or other reconsideration of all active export licenses covering advanced Nvidia AI chips and server systems destined for China as well as intermediaries in south-east Asia, including Malaysia, Thailand, Vietnam, and Singapore." They refuted Nvidia CEO Jensen Huang's claims of no evidence of chip diversion of his company's most powerful products, saying that "These statements were not simply wrong in hindsight. They were contradicted by reporting available at the time and potentially misled U.S. officials."
Huang has been a vocal advocate for relaxing export restrictions on Nvidia's advanced chips, arguing that restricting sales to China is ultimately counterproductive for American interests. In May, Huang told Bloomberg News there was "no evidence of any AI chip diversion" and that Nvidia's hardware is too large to be easily smuggled across borders, with customers aware of the rules and self-monitoring.
The indictment presents a more complicated picture of export control enforcement. The effort generated around $2.5 billion in sales for the server maker since 2024, with servers sold for $510 million between late April 2025 and mid-May 2025 going to the Southeast Asian company and on to China. All his effort finally came to fruition in December 2025, after President Donald Trump made a complete U-turn and allowed Chinese tech companies to acquire Nvidia H200 chips.
The timing raises difficult questions about the effectiveness of existing oversight mechanisms. The senators argue that if AI chips authorized for restricted destinations are being diverted or moved in ways that undermine U.S. export restrictions, then licensing should be tightened, up to and including suspension, until enforcement and end-use assurances improve.
Nvidia responded that strict compliance is a top priority for the company, and that "Unlawful diversion of controlled U.S. computers to China is a losing proposition across the board; Nvidia does not provide any service or support for such systems, and the enforcement mechanisms are rigorous and effective." Supermicro stated that the conduct alleged in the indictment "is a contravention of the Company's policies and compliance controls" and the company is cooperating fully with the investigation.
The case exposes genuine tension in technology policy. Export controls aim to protect national security by preventing advanced US technology from reaching China's military and intelligence systems. Yet those same restrictions constrain American tech companies' access to markets and revenue, creating incentives to push for looser rules. Enforcement requires vigilance across complex supply chains where companies have plausible deniability when intermediaries engage in illegal conduct. Reasonable officials disagree on where the balance should lie, but the scale of the alleged diversion suggests the current licensing regime may require significant tightening.