ai chip location tracking may become mandatory: how will it affect nvidia?

2025-05-18 general

Washington, Sunday, 18 May 2025.
us lawmakers are pushing for the chip security act. it mandates location tracking for high-end ai chips within 180 days. the goal is to prevent these chips from reaching specific countries, particularly china, where they could boost ai weaponry and surveillance. this could significantly impact nvidia’s sales and supply chain. the act requires exporters to report any chip diversions or misuse to the bureau of industry and security. a prototype of location verification for nvidia h100 chips has already been successfully demonstrated.

the chip security act

The Chip Security Act, backed by bipartisan support, aims to prevent advanced AI chips from being acquired by hostile entities [3][6]. Akash Wasil, an AI fellow at the House Select Committee on the Chinese Communist Party, stated the act leverages technical measures to tackle challenges in export control policy [4]. This includes requiring companies to implement location verification techniques and to notify the Department of Commerce if chips are diverted or smuggled [4]. The act directs the Commerce Department to study additional chip security mechanisms [4].

impact on nvidia’s financials

Nvidia could face significant financial headwinds if the Chip Security Act becomes law. The Act mandates location verification for high-end AI chips before export, potentially disrupting sales to certain regions [3]. Nvidia has already reported potential revenue losses of $5.5 billion due to halted China-bound sales [7]. To adapt, Nvidia is redesigning products like the H20 chip to comply with U.S. regulations [7]. However, these redesigns and compliance measures could increase costs and impact profit margins [2].

costs and benefits of location verification

Implementing location verification on a large scale involves costs. These include firmware updates estimated at under $1 million and a landmark network costing between $2.5 million to $12.5 million annually [2]. Despite these costs, the location verification system could be recouped if Nvidia enables the sale of just 500 additional controlled AI chips [2]. This suggests that the benefits of preventing smuggling and ensuring compliance may outweigh the financial burden [2].

broader market and strategic implications

The global AI chip market is projected to grow significantly, making the stakes of this legislation even higher [6]. The U.S. government expects the AI industry to conduct strict due diligence and screening to prevent violations of U.S. law [8]. This includes monitoring data centers with infrastructure to operate electronic assemblies containing advanced semiconductors [8]. The Chip Security Act signifies a new phase in the U.S.–China tech competition, balancing national security with economic competitiveness [7].

Bronnen

ai chips export control