Nvidia: H200 chips approved for Chinese company with no office

In this article you will see:

• What New Matrix is and why its approval is questionable
• How the government relaxed chip sales restrictions to China
• The pattern of companies with ties to sanctioned entities
• What this means for AI export control policy

What is New Matrix, the approved company with no office

New Matrix was created 17 months ago. At the address the company lists as headquarters, a building company directory does not include the firm. At the administration office of the nearby industrial park, a receptionist and a manager both said they did not know the company.

Little information can be found online about New Matrix. Its owners have ties to a Chinese private equity firm that has been on the US government sanctions list since 2024. According to The New York Times, this is not a rare oversight, but a worrying pattern of companies connected to sanctioned entities receiving approval to buy advanced chips.

The approval of New Matrix is part of a list of Chinese companies authorized to receive Nvidia H200 chips, despite ties to sanctioned companies.

How the government relaxed chip sales restrictions

Nvidia had been restricted from selling chips to China during the Biden presidency. But the Trump administration relaxed those limits after Nvidia agreed to give the government 15% of all sales. The company's CEO, Jensen Huang, also launched an intense lobbying campaign and was apparently successful.

The relaxation of restrictions means Chinese companies with ties to sanctioned entities can receive advanced AI chips, as long as they pay the 15% tax to the US government. Due diligence verification appears to be insufficient.

Concerns are that neither the Department of Commerce nor Nvidia are doing adequate verification when assessing Chinese companies authorized to handle Nvidia H200 chips.

The pattern of companies with sanctioned ties

The New Matrix case is not isolated. According to The New York Times, there is a pattern of companies connected to sanctioned entities receiving approval to buy advanced chips. Due diligence verification appears to be flawed in multiple cases.

This pattern raises questions about the effectiveness of the AI chip export control system. If companies with no physical office and ties to sanctioned entities can get approval, the system is not fulfilling its goal of preventing advanced technology from reaching unwanted actors.

The situation is made worse by the fact that Nvidia depends on China for a significant portion of its revenue. Pressure to maintain access to the Chinese market creates incentives not to question the legitimacy of buyers, even when there are red flags.

What this means for AI chip export control policy

For developers and users of AI, the news shows that AI chip export controls are weakened. The combination of relaxed restrictions, insufficient verification and financial incentive (15% to the government) creates a scenario where advanced chips can reach unauthorized actors.

Nvidia argues that selling chips to China keeps the company competitive and funds research and development. But inadequate verification can compromise national security and the integrity of the export control system.

For engineers building AI systems, the scenario reinforces the importance of considering the origin and security of the chips used in AI infrastructure. The AI hardware supply chain is becoming a geopolitical risk factor.

What changes for the AI hardware market

The availability of advanced chips for Chinese companies affects the global AI hardware market. More supply in China means less pressure on the global supply chain, but it also means Chinese competitors will have access to cutting edge hardware.

For companies that depend on AI infrastructure, the scenario is one of uncertainty. Export policy can change at any moment, affecting prices and GPU availability. Anyone planning investments in AI infrastructure needs to consider this risk.

Nvidia, in turn, faces a dilemma: keep access to the Chinese market and accept the loosening of rules, or lose revenue and cede space to competitors like Huawei, which develops its own chips.