The Malaysian government is investigating reports that a Chinese company may be evading U.S. export restrictions on advanced AI chips. The alleged method involves utilizing servers in Malaysia that house Nvidia chips.

According too the Wall Street Journal, Chinese engineers reportedly traveled to Malaysia in March with hard drives containing data. Their aim was to develop artificial intelligence models in Malaysian data centers using advanced Nvidia chips. The plan was to then transport these AI models back to China.

The United States has been tightening export controls on advanced semiconductors to China, including those from nvidia, to maintain its technological advantage.

A statement from the Malaysian trade ministry on Wednesday indicated they are “verifying the matter with relevant agencies if any domestic law or regulation has been breached.” The ministry clarified that while servers using Nvidia and AI chips aren’t classified as controlled goods under Malaysian law, the country “will cooperate with any government that requires assistance in monitoring trade in sensitive goods under the export control of their respective countries.”

The trade ministry added that data centers in malaysia “are free to make their own commercial decisions,” but emphasized that circumventing export controls is illegal. They stated they “will always act firmly against any company operating in Malaysia, including those involved in semiconductor and AI industries, that violates Malaysian and international trading regulations.”

In response to the reports,Beijing asserted that it requires Chinese firms to adhere to local laws and regulations.Foreign ministry spokesman Guo Jiakun stated, “Simultaneously occurring, it opposes any act of coercing other countries to restrict their cooperation with China,” during a press briefing. He added, “China is willing to work with countries in the region, including Malaysia, to jointly maintain a free and open international trade order.”

singapore charged three men with fraud in March in connection with the transfer of AI-powering Nvidia chips to China. The Singaporean government indicated that servers possibly containing AI-powering Nvidia chips, shipped from the united States to Singapore, ended up in Malaysia, though their final destination remained unknown.

DeepSeek‘s Role

Local media have linked these cases to the alleged movement of Nvidia chips from Singapore for use by Chinese AI firm DeepSeek. In January, DeepSeek launched its R1 chatbot, which they claimed coudl match the capacity of top U.S.AI products at a lower cost, disrupting the global tech market.

“At the same time, it opposes any act of coercing other countries to restrict their cooperation with China.”

Understanding Export Controls and AI Chips