Federal investigators are questioning how restricted chip shipments reached China through diversion schemes that bypassed export controls despite internal warning signs. US officials are now scrutinizing Nvidia to determine why the company failed to detect red flags associated with shipments of high-end graphics processors, a development that contradicts previous claims from the company's leadership that there was no evidence of such diversions.

The inquiry follows the arrest of Greg Lui, 38, and the raid on his company, Earthmade Computers. Prosecutors allege Lui smuggled more than $300 million in export-controlled AI servers to China between 2023 and 2024 by routing hardware through Malaysia and Singapore using fake paperwork. Court documents show Earthmade received over $176 million from Malaysian transshipment firms to facilitate the movement of the GPUs, which federal officials say could strengthen the military capabilities of adversaries.