According to a report by The Wall Street Journal, some Chinese artificial intelligence (AI) firms are using portable hard drives to circumvent US export restrictions on advanced NVIDIA (NVDA-US) chips. They are transferring massive amounts of data to Malaysia to continue their AI research and development.

The report notes that four Chinese technicians flew from Beijing to Kuala Lumpur, each carrying 15 hard drives, each capable of storing about 80TB of data, totaling approximately 4.8PB of information, sufficient to support multiple large language models (LLM) training. These hard drives were distributed among the four travelers’ luggage, successfully passing Malaysia's customs and immigration checks.

To reduce scrutiny risks, Chinese companies previously entered into server rental agreements with data centers in Malaysia through subsidiaries registered in Singapore. However, as Singapore tightened its AI technology export controls, Malaysia required Chinese clients to register local companies. Ultimately, the Chinese team arrived in Malaysia and rented about 300 NVIDIA AI servers for data processing.

US restrictions on chips for China have made it difficult to import advanced AI training hardware. Although NVIDIA claims there is no evidence of illegal chip transfer, the black market for NVIDIA chips in China remains active. Additionally, US government pressure makes chip smuggling activities increasingly difficult, but the Department of Commerce struggles to effectively enforce chip export controls due to budget constraints. In this context, some Chinese companies have chosen to send data overseas for training to bypass hardware restrictions. However, a Senate investigation has found that current regulatory measures have limited effectiveness and law enforcement faces significant challenges.