Nvidia H200 Chip Sales to China: Due Diligence Gaps and Compliance Risks

The US government has approved sales of Nvidia’s H200 AI chips to Chinese firms that appear to be empty shells with ties to blacklisted entities. According to The Verge, citing The New York Times, one such approved firm, New Matrix, operates out of an empty office and has no verifiable business presence, yet it is cleared to purchase high-end AI hardware.

What happened

The Verge reports that concerns are mounting that neither the US Commerce Department nor Nvidia is conducting adequate due diligence when vetting Chinese firms for H200 chip purchases. The New York Times, as cited by The Verge, identified New Matrix as an approved buyer despite significant red flags. The company was created only 17 months ago, and its listed address corresponds to a building where the company directory does not include it. Local property management staff reportedly had no record of the firm. The Times describes the office as a "hollow gray shell with wires dangling from the ceiling where lights should be."

More troublingly, the ownership structure of New Matrix links it to a Chinese private equity firm that has been on the US government’s blacklist since 2024. The Verge notes that this is not an isolated incident but part of a pattern where companies connected to entities under national-security-related trade restrictions are being approved for Nvidia chip purchases. This occurs against the backdrop of the Trump administration relaxing previous Biden-era export restrictions after Nvidia agreed to give the government a 15-percent cut of all sales. Nvidia CEO Jensen Huang has also engaged in intense lobbying efforts, and The Verge mentions reports that he was targeted by China’s Ministry of State Security in a spying plot.

Why it matters for small company owners and team leads

For small and mid-sized companies operating in tech-adjacent sectors, this story is a stark warning about the fragility of supply chains and the rising cost of compliance. When major hardware providers like Nvidia have their export controls bypassed or poorly enforced, it creates a volatile regulatory environment that can ripple down to smaller firms. If your company relies on AI infrastructure, cloud services, or specialized hardware, you are exposed to sudden policy shifts and supply disruptions that are no longer just theoretical. Furthermore, this highlights a broader trend: the line between legal compliance and ethical risk is blurring. Small businesses that partner with vendors or customers in high-risk jurisdictions may face reputational damage or secondary sanctions if due diligence is not rigorous. You cannot assume that because a large tech company is selling a product, the transaction is safe from regulatory backlash. The fact that "empty offices" are receiving billions of dollars in AI chips suggests that the verification systems currently in place are failing, which means the risk of accidental non-compliance for smaller players is higher than ever.

What to do this week

1. Audit your direct and indirect suppliers to identify any hardware or software components that rely on US-controlled AI chips or export-restricted technology, and document the origin and compliance status of each.
2. Review your customer and partner contracts to ensure they include explicit clauses requiring compliance with current US export control laws, including the Entity List and any new blacklists, to protect your company from secondary liability.
3. Brief your leadership team on the specific risks associated with your current supply chain, using this Nvidia case as a concrete example of how due diligence failures at the top can create downstream instability for smaller businesses.

Sources

• The US let Nvidia sell chips to an empty office in China — The Verge - Policy