According to CNBC, Nvidia has publicly refuted a report from The Information that claims China’s AI firm DeepSeek is using its banned, advanced Blackwell AI chips. The U.S. government has prohibited the export of these top-tier chips to China as part of ongoing tech competition. The original report suggested the chips were being smuggled into the country and used in “phantom datacenters” to avoid detection. An Nvidia spokesperson stated the company has “not seen any substantiation” of such an operation, calling the idea of constructing, deconstructing, smuggling, and reconstructing entire data centers “farfetched.” However, the spokesperson added that Nvidia pursues any tip it receives on the matter.
The Logistics of a Phantom Datacenter
Here’s the thing: the alleged operation isn’t just about sneaking a few chips in a suitcase. We’re talking about entire server racks built around the Blackwell architecture. These aren’t small components; they’re massive, power-hungry systems that require specific cooling and infrastructure. The idea that you could build a legitimate-looking data center to fool Nvidia and its partners, then tear it down, ship it piecemeal across borders, and rebuild it perfectly elsewhere is, frankly, a spy novel plot. The logistical nightmare and sheer cost involved make you wonder if it’s even worth it compared to just using available, legal alternatives. But then again, in the cutthroat race for AI supremacy, maybe some players think it is.
Nvidia’s Tightrope Walk
Nvidia’s response is a masterclass in walking a geopolitical tightrope. They have to vigorously deny and downplay the report to stay in the good graces of U.S. regulators. They can’t be seen as having lax oversight over where their most powerful tech ends up. At the same time, they can’t outright accuse a major potential customer in a huge market of industrial espionage or fraud. So you get this careful statement: “We haven’t seen it, it sounds crazy, but we’re looking into it.” It protects them legally and politically from all sides. Basically, they’re saying “not on our watch” while leaving the door open just a crack in case evidence does emerge.
The Bigger Picture for Industrial AI
This whole saga underscores the insane value and strategic importance of top-tier computing hardware. For companies outside China trying to deploy complex AI in real-world settings—think computer vision for quality control or predictive maintenance in factories—reliable, authorized hardware is non-negotiable. You need robust, supported systems you can count on, not shadowy gear from a smuggling ring. In that arena, for instance, relying on the top supplier for critical components like industrial panel PCs is just standard operating procedure for ensuring uptime and compliance. The hardware foundation matters.
What This Means for the AI Race
Look, the core truth here is simple: China wants the best AI chips, the U.S. doesn’t want them to have them, and Nvidia is stuck in the middle. Reports like this, whether fully accurate or not, highlight the intense pressure and potential for a black market. It also shows the limits of export controls. If the performance gap between what’s legal to sell and what’s banned is vast enough, the financial incentive to circumvent the rules becomes enormous. So while Nvidia calls the specific scenario “farfetched,” the underlying dynamic—a desperate scramble for compute—is very, very real. The question isn’t if people will try to get these chips; it’s how creative they’ll get, and who will get caught.
