Posted on 08/26/2024 9:02:18 PM PDT by SeekAndFind
The US has blocked export of Nvdia chips to China. But where there’s profit, there’s a way.
The Wall Street Journal reports China’s AI Engineers Are Secretly Accessing Banned Nvidia Chips
Chinese artificial-intelligence developers have found a way to use the most advanced American chips without bringing them to China.
One entrepreneur helping Chinese companies overcome the hurdles is Derek Aw, a former bitcoin miner. He persuaded investors in Dubai and the U.S. to fund the purchase of AI servers housing Nvidia’s powerful H100 chips.
In June, Aw’s company loaded more than 300 servers with the chips into a data center in Brisbane, Australia. Three weeks later, the servers began processing AI algorithms for a company in Beijing.
“There is demand. There is profit. Naturally someone will provide the supply,” Aw said.
Renting far away computing power is nothing new, and many global companies shuffle data around the world using U.S. companies’ services such as Google Cloud, Microsoft Azure and Amazon Web Services. However, those companies, like banks, have “Know Your Customer” policies that may make it difficult for some Chinese customers to obtain the most advanced computing power.
The buyers and sellers of computing power and the middlemen connecting them aren’t breaking any laws, lawyers familiar with U.S. sanctions say. Washington has targeted exports of advanced chips, equipment and technology, but cloud companies say the export rules don’t restrict Chinese companies or their foreign affiliates from accessing U.S. cloud services using Nvidia chips.
Buyers and sellers of computing power use a “smart contract” in which the terms are set in a publicly accessible digital record book. The parties to the contract are identified only by a series of letters and numbers and the buyer pays with cryptocurrency.
The process extends the anonymity of cryptocurrency to the contract itself, with both using the digital record-keeping technology known as blockchain. Aw said even he might not know the real identity of the buyer. As a further mask, he and others said Chinese AI companies often make transactions through subsidiaries in Singapore or elsewhere.
One decentralized GPU provider with more than 40,000 chips in its network, io.net, advertises in its user guide that it doesn’t impose know-your-customer restrictions. This “allows users to access GPU supply and deploy clusters in less than 90 seconds,” it says.
Meanwhile, Aw is raising more money from a group of investors in Saudi Arabia and South Korea. They plan to build a cluster of Nvidia’s latest Blackwell chips for another Singapore company with a Chinese parent.
“No one is breaking the export controls,” Aw said. “Legally speaking, they are Singapore companies.”
China sets up an AI company in Singapore.
AI developers buy cloud time through a subsidiary that further masks the operation by paying in Bitcoin.
In turn, the subsidiary buys time from a company Dubai or Singapore that hosts the servers.
US politicians outraged. But some of us are amused knowing full well that sanctions don’t work.
And instead of cloud profits going to US corporations, the profits go to Saudi Arabia, Singapore, Dubai, and South Korea.
Only Amazon is forced to “know your customer”.
Didn't you declare victory on these sanctions?
Here's the deal: China and India will always buy. And they should. It's in their best interest. — Mike "Mish" Shedlock (@MishGEA) September 18, 2023
September 19, 2023: Lesson of the Day: Sanctions Don’t Work Because They Create New Markets
December 29, 2023: How Russia Makes a Mockery of US Sanctions in One Picture
February 19, 2024: US Impounds Thousands of German Vehicles Over One Tiny Part Made in China
May 21, 2024: Another Sanction Failure: The US Blacklisted Xiaomi Three Years Ago Now it Makes EVs
June 11, 2024: Russia to Export Coal to India Via Iran. It’s a 4 Alarm Bells Fire
Sanctions don’t work but they do drive up prices and/or create competition for US companies.
The beneficiary is either the sanctioned company, as in the case of China’s EV maker Xiaomi, or intermediaries as in today’s example.
On April 21, 2024 I noted Biden Eases Sanctions on Venezuela, Blocks Rare Earth Mining in Alaska
What a hoot. How’s that great tradeoff working out?
Since we know the answer, here’s our real question of the day: Is robin Brooks finally ready to throw in the towel on the effectiveness of sanctions?
If he responds, I will add an addendum.
Shows how desperate Chicoms are.
They could extend the know your customer provisions to buyers of Nvidia chips. It’s already the case with financial transactions for any.government that does business with the US. That would either shut his business down or make him an international fugitive subject to Interpol extradition.
The biggest reason is our leaders are corrupt.
Ping.
Another game of Fed.gov whack-a-mole begins.
Considering our (ethnic) Chinese are better than their Chinese ... The CEOs of the three biggest American chip companies are ethnic Chinese. And they did it with almost zero government help. With 1.4b people to choose from, and probably hundreds of billions in subsidies, China couldn't match the output of three foreign interloper CEOs who worked their way through the ranks.
All dictatorships end up hereditary aristocracies. People in positions of power everywhere want to hand over their perks and privileges to their kids. In a dictatorship, that's easy as pie. Forget foreigners - even talented Chinese from obscure backgrounds find their paths to advancement blocked by entrenched elites descended from the men who attained their positions from involvement in the party's civil war victory.
China's Achilles heel is dictatorship. So long as its talents cannot find an outlet, they will leave for friendlier shores. Those who remain will find their talents underutilized. Imagine Steve Jobs working at Radio Shack as an electronics hobbyist instead of being able to raise the capital to bootstrap Apple into the trillion dollar behemoth it has become.
America's strength lies in its persistent leadership on the technological frontier. That comes from a ruthless sorting according to ability that ignores the backgrounds of the talented. It is this continuous churning of a non-hereditary elite of the best and brightest that has driven and continues to drive American technological leadership. About 80 years ago, Stalin alluded to this, when crediting massive US aid for Russia's progress against Germany:
"I want to tell you what, from the Russian point of view, the president and the United States have done for victory in this war," Stalin said. "The most important things in this war are the machines.... The United States is a country of machines. Without the machines we received through Lend-Lease, we would have lost the war."
| Rank | Name | Market Cap | Price | Today | Price (30 days) | Country | |
|---|---|---|---|---|---|---|---|
 | 1 |  NVIDIA NVDA | $3.182 T | $126.46 | 2.25% | 🇺🇸 USA | |
| 2 |  TSMC TSM | $876.81 B | $169.07 | 1.29% | 🇹🇼 Taiwan | |
| 3 |  Broadcom AVGO | $773.90 B | $159.62 | 4.05% | 🇺🇸 USA | |
| 4 |  Samsung 005930.KS | $380.47 B | $57.34 | 0.13% | 🇰🇷 S. Korea | |
| 5 |  ASML ASML | $365.36 B | $883.31 | 2.64% | 🇳🇱 Netherlands | |
| 6 |  AMD AMD | $250.81 B | $149.99 | 3.22% | 🇺🇸 USA | |
| 7 |  QUALCOMM QCOM | $193.27 B | $169.49 | 2.31% | 🇺🇸 USA | |
| 8 |  Texas Instruments TXN | $191.58 B | $208.25 | 0.78% | 🇺🇸 USA | |
| 9 |  Applied Materials AMAT | $167.08 B | $196.23 | 3.18% | 🇺🇸 USA | |
| 10 |  Arm Holdings ARM | $142.20 B | $128.90 | 4.96% | 🇬🇧 UK |
They can study them all they want. They haven’t the ability to copy them or the equipment to manufacture them.
CC
All your data belong to us.
yet...
Well as the equipment used to make them comes from Taiwan they might be waiting awhile.
CC
Nice chart, but they put a chip in our routers Cicso supposedly didn’t know abut, and those routers were used in the Pentagon. Let my ow when our ethnic chinese get a coup like that.
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