On Dec. 8, Federal prosecutors in Texas unsealed documents that revealed an investigation into a massive smuggling network that stretched across the U.S. and the world.
Dubbed "Operation Gatekeeper" by the feds, the investigation wasn't focused on drug smuggling or stolen goods but rather an alleged secret, underground network of suppliers for Nvidia 's graphic processing units, or GPUs. Such chips are the backbone of the AI race, and can be used for military or civilian purposes.
The government said a hidden smuggling ring was sending chips to China in defiance of American national security export control laws. The smuggling syndicate allegedly involved operatives illegally entering the United States, phony front companies and a secret warehouse shipping operation in New Jersey that was penetrated by at least one undercover agent working on behalf of the U.S. government.
What that federal investigation found showcases the desperate struggle between the United States and China for access to cutting-edge chips that many believe will control the fate of the global economy. The smuggling ring, they said, attempted to export at least $160 million worth of Nvidia H100 and H200 GPUs to China between October 2024 and May 2025.
The demand for these chips from China is enormous, and the best supply is still in the United States. Although China is establishing its own local AI chip market, the county remains highly dependent on Nvidia's technology.
"I think more than 60% of the leading AI models in China are currently using Nvidia's hardware," said Ray Wang, an analyst at SemiAnalysis. "Nvidia have [a] systematic advantage ranging from hardware to software. And I think for now, if you combine [those] two factors together, it's still a thing that China is trying to catch up to."
As they gathered facts, the government sent an undercover agent into a warehouse in Secaucus, New Jersey. There, the person allegedly witnessed suspects relabeling Nvidia GPUs with branding for a phony company they called "Sandkayan." The shipping and export paperwork, the government said, misclassified the goods as "adapters," "adapter modules" and "contactor controllers."
Operation Gatekeeper culminated in a dramatic scene at the New Jersey warehouse on May 28 as three trucks hired by the conspirators pulled in to pick up the smuggled chips.
In near real time, a user in a text chain allegedly used by the conspirators messaged that one of the truck drivers transporting the goods to the New Jersey warehouse reported that police officers had appeared at the scene and were asking questions about the cargo's destination.
According to the texts, conspirators told the drivers to "just say they don't know anything."
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