US lawmakers have demanded the Commerce Department immediately suspend Nvidia's export licenses for advanced AI chips to China and Southeast Asia, citing evidence of a large-scale smuggling scheme. The request follows Friday's indictment of Supermicro co-founder Wally Liaw for allegedly diverting Nvidia chips to China via intermediaries. Senators Banks and Warren argue Nvidia executives misled officials by claiming no diversion occurred, contradicting reporting available at the time. This comes after President Trump approved Nvidia's January sale of its H200 AI chips to China, despite bipartisan efforts to block such licenses.

The Commerce Department has not commented on the letter but previously stated controlled sales of H200s to China would strengthen the US tech ecosystem. However, the Supermicro case reveals potential flaws in Nvidia's compliance systems, with experts noting the company lacks sophisticated supply chain monitoring compared to basic retail tracking. The senators also call for investigating whether Nvidia executives provided materially false assurances to officials about chip diversion.

Market implications could be significant if licenses are suspended, potentially costing Nvidia billions in Chinese sales and forcing it to overhaul its export compliance infrastructure. The broader impact may accelerate US efforts to secure AI chip supply chains through legislation like the Chip Security Act, which requires location verification for advanced chips to prevent diversion.