U.S. authorities have covertly placed location trackers in certain shipments of advanced artificial intelligence (AI) chips deemed at high risk of being illegally diverted to China, Reuters reported on August 13, citing two people directly familiar with the previously undisclosed enforcement tactic.

The measures, applied only to shipments under investigation, aim to monitor whether AI chips end up in destinations subject to U.S. export controls. The trackers could help the government prosecute individuals and companies profiting from violations of export regulations.

While the Trump administration sought to ease curbs on certain models such as Nvidia's H20, Washington has continued efforts to block exports of more advanced AI chips to China.

The practice of embedding trackers in sensitive shipments dates back decades; a 1985 court ruling described U.S. Customs intercepting restricted equipment at Houston airport and installing tracking devices. In recent years, such tools have been used to combat illicit semiconductor transfers.

Five people active in the AI server supply chain told Reuters they were aware of trackers being used in shipments from server makers like Dell and Supermicro containing Nvidia or AMD AI chips. The devices are typically hidden inside shipping packaging, with some cases involving smaller trackers inside the servers themselves.

Trackers may be installed under administrative approval or via a court-issued search warrant, which allows the data to be used in criminal cases. Reuters could not determine how frequently they are deployed in chip-related probes or when the practice began. The U.S. imposed restrictions on sales of advanced AI chips from Nvidia, AMD, and others to China in October 2022.

In one 2024 case, Dell servers equipped with Nvidia AI chips reportedly shipped with both large trackers attached to crates and smaller concealed devices inside the units. Other suppliers have allegedly removed such trackers before delivery.

The U.S. Commerce Department's Bureau of Industry and Security (BIS), Homeland Security Investigations (HSI), and the FBI are said to be involved, though all declined to comment. China's Foreign Ministry said it was unaware of the matter. Dell said it had “no knowledge” of trackers in its shipments, while Supermicro, Nvidia, and AMD declined comment.

Some suppliers handling controlled chips and servers told Reuters they regularly inspect equipment for embedded trackers to avoid interception risks. A recent U.S. court affidavit in a chip-smuggling case described suspects checking for tracking devices in Nvidia-equipped servers.

The tracker revelations come amid rising security tensions over Nvidia's China-bound H20 AI chip. On July 31, China's Cyberspace Administration summoned Nvidia to explain alleged “backdoor” vulnerabilities. Nvidia denied the claims, stating its chips have no backdoor, kill switch, or monitoring software.

In January, Reuters reported U.S. authorities had traced organized smuggling of AI chips into China via Malaysia, Singapore, and the UAE, though it was unclear if trackers were used. In May, bipartisan lawmakers introduced the “CHIPS Security Act,” requiring high-end U.S. AI GPUs and chips to have location-tracking technology within 180 days to prevent diversion to restricted markets.

Against this backdrop, Beijing's demand for Nvidia to clarify security concerns over the H20 underscores how export control enforcement and cybersecurity fears are increasingly intertwined in the global AI hardware race.