Why America Needs the Chip Security Act

AI Chips Are Critical for National Security

Sen. Tom Cotton: “Keeping advanced AI chips out of the hands of the Chinese Communists isn’t about business, it’s a national security issue.”

• The Trump Administration’s AI Action Plan: Denying adversaries access to AI chips prevents them from developing “novel military capabilities.” 

The Chinese military buys and deploys U.S. chips. 

• One example: A U.S. company recently pleaded guilty and paid $140M because its chip software powered PLA hypersonic-missile simulations. 
• Just as we would not sell F-35 fighters to the PRC, we shouldn’t sell chips that threaten our armed forces.

The CCP uses American chips to abuse human rights.

• Advanced AI chips have been used to power systems that track Uyghurs and other ethnic minorities in China, prompting bipartisan outrage.
• DeepSeek denies the Uyghur genocide, showing how China weaponizes AI.

Smuggled American chips power Russia’s war machine. 

• U.S. chips have been found in Russian military equipment recovered from Ukraine.
• Chips have also been smuggled to Iran.

AI Chips Decide the AI Race

America leads China in the AI race because we have more—and more advanced—AI chips.

• The United States controls 75% of the world's AI supercomputing capacity with China (15%) in a distant second place.
• The U.S. can use this compute advantage to deploy more AI-enabled applications across its economy.
• This lead in advanced AI chips therefore compounds into a broader economic advantage over time. As AI systems drive productivity growth and innovation, they strengthen the underlying factors of national power. 

China can’t compete without our chips.

• DeepSeek tried and failed to train on Huawei chips.
• Huawei’s founder admits its chips “lag the U.S. by a generation.” 
• DeepSeek’s CEO likewise admits that AI chip export controls remain the biggest barrier to Chinese AI progress.

China depends on the West for over 90% of its AI compute capacity.

• Huawei can produce only 200,000 AI chips annually.
• Yet annual Chinese demand for Nvidia H20s was estimated at 1.8 million.
• Leading Chinese AI models were trained on Western hardware.

Every chip sold to adversaries means one less chip for American firms.

• American companies face up to 12 month wait times for Nvidia GPUs.

Chip Smuggling Is Rampant

An estimated 140,000 advanced AI chips—worth $5-7 billion—were smuggled to the PRC in 2024.

• Over $1 billion worth of Nvidia chips were smuggled into China in just 3 months in 2025. 

The evidence of smuggling is overwhelming.

• Eight news outlets—including the New York Times and Wall Street Journal— independently documented evidence of large-scale smuggling operations.
• Export-controlled chips flood Chinese online marketplaces.
• Malaysia’s GPU imports jumped 3,400% from 2023 to 2025, tracking China's smuggling surge.
• Smugglers have hidden GPUs in prosthetic baby bumps and crates of live lobsters.
• There is a booming underground industry in China to repair banned Nvidia GPUs.
• DOJ arrested two US-based Chinese nationals for exporting tens of millions of dollars of AI chips.
• Singapore accounted for 28% of Nvidia's GPU revenue in 2024 but only 1% of its GPUs shipped there and recently arrested three suspects accused of smuggling $390 million in AI servers. 

The Bureau of Industry and Security (BIS) lacks the resources to stop smuggling.

• Its $200M budget is dwarfed by billion-dollar smuggling operations.
• One BIS export-control officer covers all of Southeast Asia.

Trump Officials Demand Action

The Administration’s AI Plan explicitly directs the Administration to explore location verification for AI chips.

• OSTP Director Michael Kratsios confirmed that it is actively doing so.

Trump officials agree that urgent action is needed to combat smuggling.

• White House AI Czar David Sacks: We must take “aggressive steps” to combat smuggling, which is an “important policy objective.”
• OSTP Director Kratsios: The Administration must continue to ensure that China cannot obtain the “highest-end chips.”
• Commerce Secretary Howard Lutnick: Chip diversion has “got to end.”
• Secretary of State Marco Rubio: “We cannot allow China to get its hands on advanced AI chips.”

Industry leaders agree.

• Anthropic: “Chip smuggling is a major threat.”
• Semiconductor Industry Association: “We echo the call for all governments to take the necessary actions needed to curtail [the] illicit flow” of advanced AI chips.
• Semianalysis: AI chip export controls have “only been on paper” because “restricted Nvidia GPUs were simply re-exported by bad actors to China.”
• Dmitri Alperovitch, co-founder of Crowdstrike: “AI chip diversion to China is a huge problem.”

Yet Nvidia will say anything to keep selling chips.

• Nvidia CEO Jensen Huang claimed there’s “no evidence” of chip diversion and that the PLA won’t use American chips—contradicting the facts and the Administration.
• Even as their chips are discovered in PLA systems, Nvidia claims that “commercial chip sales pose no more national security threat than uncontrolled products like commercial jetliners and consumer pickup trucks.”

Government leaders reject these denials.

• AI Czar Sacks: Companies like Nvidia “look the other way or turn a blind eye” to smuggling because “it’s profitable.”
• Secretary of State Rubio: Chip companies put “profits ahead of national security.” 
• Bipartisan congressional leaders have questioned Nvidia—in nine letters sent this year alone—including for its role in powering DeepSeek.

The Chip Security Act Answers the Call

The Chip Security Act combats diversion by requiring location verification for AI chips.

• The bill does not mandate a specific technology.
• It provides flexible options such as periodic on-site audits, protecting offline deployments like air-gapped data centers.
• Companies—not the government—prove their chips remain in authorized locations.

Bipartisan Experts Support the Chip Security Act

• Sam Hammond, Foundation for American Innovation: “The CSA is both an urgently needed reform and one carefully crafted to minimize burdens on U.S. technology companies and chipmakers.”
• Kit Conklin, Atlantic Council: “The CSA would provide a low-burden, high-impact policy solution to a problem that current enforcement tools have failed to solve.”
• Michael Sobolik, Hudson Institute: Congress “needs to pass” the Chip Security Act to “crack down on problematic actors.” 
• Mark Beall, Jr., AI Policy Network: The CSA is “absolutely instrumental.”

Location Verification Is Proven Technology

Ping-based location verification (PBLV) can be deployed at scale.

• Nvidia agrees it can implement software-based location verification.
• PBLV leverages existing security features of advanced AI chips.
  
  • Nvidia’s own materials confirm its chips already have remote attestation capabilities.
• Working prototypes on Nvidia chips likewise confirm feasibility.
• Chips already transmit a huge amount of data about temperature and power consumption, further demonstrating the technical viability of location reporting.

PBLV is secure and widely deployed.

• It’s less susceptible to spoofing than GPS-based alternatives.
• Geolocation technologies have operated for decades in commercial contexts.

PBLV securely protects privacy without enabling government surveillance.

• It requires only a firmware update, no hardware changes.
• It confirms only geographic region, not computational activities or data.
• It does not create or require a security backdoor.
• Unlike a “kill switch” or “geofencing,” it does not restrict chip functionality.

The Chip Security Act Makes America More Competitive

Without location verification, BIS faces an impossible choice: protect our technology or promote adoption of the U.S. AI stack. 

• Option 1: Impose broad restrictions that hinder smuggling but drive demand for Chinese alternatives.
• Option 2: Approve more exports but enable massive chip diversion. 

Location verification resolves this dilemma.

• American companies can export more chips, strengthening our economy. 
• BIS can focus its limited resources on efficiently combatting smuggling.
• American AI stays dominant globally because countries buy U.S. chips instead of inferior Chinese alternatives.

The Bottom Line

America’s AI advantage depends on controlling our chips. The Chip Security Act ensures we keep that control.