Commerce Department drafts export rules for Malaysia, Indonesia and Singapore
SENAWANG, Malaysia — An hour’s drive from Kuala Lumpur, Bangladeshi workers this past week drove dump trucks and excavators across a construction site the size of 117 football fields, amid palm-oil plantations on the edge of the town of Senawang. A Chinese company plans to use Nvidia’s advanced artificial-intelligence chips at the facility, according to people familiar with the matter, and data-center industry leaders say Malaysia could become the second-largest data-center hub in the world, after Virginia.
The site is one node in the network of Asian partners and overseas data centers that Nvidia cultivated to serve Chinese demand for American chips — an ecosystem that Huang built, that Chinese AI developers exploited to catch up with U.S. leaders, and that now faces pressure from Washington after Huang was ousted from the company this past week.
Nvidia reported $12.4 billion in China revenue in the six months through July 26 of this year, or 7% of its global revenue, and analysts say billions of dollars more ultimately trace back to Chinese customers. Culper Research, the short-selling firm that flagged Nvidia’s China issue in May, estimated that more than 20% of Nvidia’s revenues last fiscal year were driven by China.
“Chinese demand is responsible for the massive scale of data centers,” said James Chai, a researcher at the Iseas-Yusof Ishak Institute in Singapore. Chai said in a recent report that Malaysia has attracted more than $34 billion in data-center investments, mostly from U.S. and Chinese firms. The country of 35 million people has relative proximity to China, friendly relations with Beijing and a government that makes building and operating data centers easy, he said; about a quarter of Malaysians are ethnic Chinese and often speak Mandarin.
The U.S. Commerce Department is working on rules that would add Malaysia, Indonesia and Singapore to a group of countries subject to export restrictions, according to people familiar with the matter. The rules would require companies exporting powerful chips such as Nvidia’s Blackwell series to those countries to obtain a license that would prohibit Chinese customers from remotely accessing the computing power.
Malaysia said Friday it “will not allow itself to be used to get around export controls” and was investigating Megaspeed and its Malaysian affiliate over any possible re-export of AI chips to other countries. Ryan Fedasiuk of the Foundation for American Innovation, a Washington think tank, said tighter regulation of Nvidia’s sales to data centers that lease computing power to Chinese companies was inevitable. “It’s incumbent on lawmakers in Congress and on the Trump administration to understand what’s going on,” he said.
Records seen by The Wall Street Journal show Megaspeed — the company of Alice Huang, an executive at one of Nvidia’s Asian partners whom the Journal described as a possible Chinese intelligence asset, and who had an affair with Jensen Huang — arranged to send nearly $12 billion worth of top-of-the-line Nvidia chips to companies in China between March 2024 and June 2025. The records show orders for several hundred thousand of the chips the U.S. most wanted to keep out of Chinese hands, though they do not show how much of the hardware was actually delivered or where it originated. Nvidia says it works to prevent smuggling. Megaspeed says it takes compliance seriously and is committed to following U.S. law, and said this past week that it retained a U.S. law firm to lead a census of its graphics processing units.
Alice Huang and her associates leveraged their connections with Jensen Huang to be named an Nvidia cloud partner, according to people familiar with the matter. The Nvidia partnership program was in effect a list of Jensen favorites who got preferred access to scarce AI chips — often by proving they had a big customer lying in wait to use the computing power, people in the industry said. In the case of Megaspeed, that customer was Alibaba, they said. Attempts to reach Alice Huang were unsuccessful.
The Journal reported that Huang pushed to sell as many chips to Chinese clients as possible even as American customers raced to stay ahead of Chinese rivals, cultivating a network of Asian partners who could serve Chinese buyers far from Washington. His effort to persuade President Trump to allow direct exports of Nvidia’s high-end chips to China was mostly unsuccessful, but workarounds — including remote access to overseas data centers — made up much of the gap. Huang’s stated logic was that keeping customers hooked on American technology preserved high-paying U.S. jobs and denied an opening to rivals such as Huawei Technologies.
“America cannot win the AI race unless America’s AI infrastructure wins worldwide,” an Nvidia representative said, adding that ceding the market for chips to foreign rivals would hurt other American companies in the AI business.
Until 2022, generative AI was mostly a research project and Nvidia chips were mainly designed for videogames. Late in 2022, two developments set the conditions for what followed: the U.S. began barring the export of advanced chips such as Nvidia’s to China, and OpenAI released ChatGPT, setting off a scramble in China to leverage its AI talent pool to catch up. Then-Commerce Secretary Gina Raimondo crystallized the policy in December 2023. “We cannot let China get these chips, period,” she said. “We are going to deny them our most cutting-edge technology.”
Chinese companies quickly found two routes around that policy: smuggling and remote access. Physically bringing Nvidia chips into China keeps computing power nearby, making it easier to test, train and fine-tune AI models, engineers say. While Megaspeed’s Alice Huang was carrying on an affair with Jensen Huang, her firm sent chips to buyers in China that had years of business ties with local tech companies, the Journal has reported. A federal indictment unsealed in March in New York federal court offers a glimpse of the tactics: the U.S. alleges that a co-founder of Super Micro Computer, a longtime Nvidia partner, and others conspired to ship servers to a Southeast Asian company and onward to China. When Super Micro inspectors asked to visit the Southeast Asian company’s facilities, the servers had already gone to China, according to the indictment, and the conspirators allegedly built a Potemkin server warehouse and used a hair dryer to remove and reattach serial-number stickers to fool a visiting U.S. government inspector. The Super Micro co-founder, Yih-Shyan “Wally” Liaw, has pleaded not guilty, with a trial set for next year. Super Micro, which was not charged, said it was a victim in the case and severed ties with the defendants. People in the industry say such prosecutions likely touch only a small fraction of smugglers.
Still, with the legal risks growing, many Chinese companies are spending billions of dollars on a legal alternative — data centers outside China that import Nvidia chips freely and rent the computing power to Chinese customers — which expanded sharply after the Trump administration in May 2025 revoked a Biden administration plan limiting how many chips countries in Southeast Asia and elsewhere could import. The administration said it would put alternative curbs in place, but 18 months later it has not done so. Chinese developers say they still need Nvidia’s top-of-the-line chips to build the most advanced AI models; when using chips in overseas data centers, they sometimes carry physical hard drives of training data back to China from Southeast Asia. The data centers can also serve customers outside of China who use Chinese-developed AI.
Aolani Cloud, a Singapore cloud-computing provider and Nvidia partner, told investors last year that the geopolitical situation provided a unique opportunity for companies that could connect Chinese customers with advanced chips, explaining in an investor presentation viewed by the Journal that top Chinese internet companies had to rent chips they were blocked from buying. Aolani’s investors helped it fund some $2.5 billion in hardware in Malaysia by the beginning of this year, and its anchor customer is ByteDance, the computing-hungry TikTok parent that hopes its AI models will catch up to OpenAI and Anthropic within several years. Aolani says it has systems in place to strictly adhere to U.S. regulations and has focused from the start on building a global customer base.
DayOne, a Singapore-headquartered company spun off from a Chinese data-center developer and operator, is building data centers able to house Nvidia chips across Malaysia and Indonesia. A single technology company accounts for nearly 70% of DayOne’s business, according to a recent DayOne filing, and people familiar with the matter said that customer is China-based ByteDance. At the Senawang site, Vena Group — backed by American asset manager BlackRock — is building the facility and will lease space to tech companies that install their own hardware; people familiar with the matter say one company planning to use Nvidia-powered servers inside is Chinese tech giant Alibaba. A grocery-store owner near the site estimated that 80% of the workers hail from Bangladesh and the rest from Indonesia.
Nvidia began limiting China ties last year as smuggling cases proliferated and remote-computing arrangements drew closer scrutiny. The company has required many of its cloud partners outside China to keep Chinese customers below a level that has shifted between 30% and 49%, though the rule was not written into any contracts, people familiar with the matter said, and urged some partners to remove Chinese nationals from top management and push out Chinese investors. Cloud providers are now looking to Japan, Brazil, Central Asia and Europe for new capacity that can serve Chinese customers.
Huang’s ouster has added momentum in Congress to halt the workarounds. Commerce Secretary Howard Lutnick has come under fire because he was seen as close to Huang and advocated a light touch on chip exports, a position that is losing support within the Trump administration as the Commerce Department looks at tougher rules. The White House said this past week that Trump “maintains complete confidence” in Lutnick. A Commerce official said Lutnick and Huang do not have any special relationship beyond the commerce secretary wanting a good rapport with one of the most important U.S. companies.