KUALA LUMPUR: Malaysia could face tighter scrutiny by the United States over advanced artificial intelligence (AI) chip shipments following allegations that Nvidia graphic processing units (GPUs) were diverted to China, although a blanket ban on supplies is unlikely for now.
Economists Business Times spoke to opine that the development could prompt Washington to strengthen export licensing requirements, end-user verification and shipment monitoring to prevent advanced semiconductor technology from reaching China through third countries.
“The bigger concern is whether Malaysia’s reputation as a trusted semiconductor and technology hub could be affected, potentially making access to advanced AI chips more costly and time-consuming,” BIMB Securities chief economist Imran Nurginias told Business Times.
Malaysia is embroiled in a controversy surrounding the relationship between Nvidia’s CEO Jensen Huang and Alice Huang, who is alleged to be a Chinese spy trying to get advanced AI technology from the US.
Alice was alleged to have founded Singapore-based Megaspeed International Pte Ltd, which had been investigated by authorities in the US and Singapore over suspected breaches of US export controls over advanced AI chips to China.
The issue has also drawn attention to Malaysia following reports linking Megaspeed’s Malaysian subsidiary, Speedmatrix Sdn Bhd, to the supply chain.
Julia Goh, senior economist at United Overseas Bank’s Global Economics and Markets Research said this episode puts third-country data centres squarely back in Washington’s spotlight.
But following the latest news, the US Congress is more likely to pass legislation aimed at tightening China’s access to AI chips in light of the latest developments.
She added that the US would likely require businesses to track their chips to combat smuggling and push allies to restrict more chipmaking to China. Following the latest news, the US Congress is more likely to pass legislation aimed at tightening China’s access to AI chips.
“We think the more likely outcome is not a hard cap on Malaysia’s chip supply, but tighter conditions on how chips are used once they land: stronger end-user checks, and location tracking,” said Goh.
Bank Muamalat Malaysia Bhd’s economist Dr Afzanizam Abdul Rashid also expects the US Congress to push for legislation restricting China’s access to advanced AI chips, with businesses potentially required to track shipments more closely to prevent smuggling.
He said a more hawkish stance towards China on technology and national security matters could emerge when the newly elected Congress takes office in January 2027.
“I would expect greater scrutiny from the US. The recent scandal with Nvidia is the direct link with China, as there is a security issue that may warrant further investigation,” he said.
As it is, the investigation on Section 301 Trade Act 1974 on excess capacity in the semiconductor is still ongoing, added Afzanizam.
Despite the concern over tighter scrutiny by US authorities on companies operating in Malaysia, Goh said that Malaysia’s enforcement track record is credible, having introduced permit requirements for US chip shipments and carried out customs seizures.
DATA CENTRE PIPELINE
On the implications for Malaysia’s data centre industry, Imran of MBSB Research said he does not expect an immediate impact on the country’s investment pipeline, particularly for projects with legitimate end-users and transparent procurement arrangements.
However, tighter export controls could increase procurement costs, delay the deployment of advanced GPUs and affect project timelines.
“More importantly, prolonged uncertainty could influence future investment decisions, particularly among global hyperscalers and AI infrastructure providers,” he said.
He added that Malaysian companies involved in the Nvidia supply chain were also likely to face closer scrutiny from US and local authorities.
Companies with strong governance and supply-chain controls should be better positioned to manage the risks, he said, adding that Malaysia’s ambition to become a regional AI and data centre hub should not be compromised by weaknesses in export-control enforcement.
SNS ONLY SUPPLIES TO LOCAL DATA CENTRES
Meanwhile, SNS Network Technology Bhd, which is involved in Nvidia’s GPU supply in Malaysia, stressed that all Nvidia GPU servers it procured are intended for Malaysian data centre projects, and not exported overseas.
Its group managing director Ko Yun Hung said that SNS conducts due diligence on customers, including checks on their backgrounds, ownerships, intended use, end-user and deployment locations.
“We take export-control compliance seriously and conduct due diligence on our customers, including their background, ownership, intended use, end-user and deployment location,” he said.
Ko added that the company also assessed potential onward-transfer and diversion risks to ensure compliance with applicable regulations.
SNS is part of the Nvidia Partner Network (NPN) as a solution provider, supplying AI infrastructure and solutions to Malaysian businesses and organisations.
Its activities include supplying complete AI server solutions to data centres and enterprises, as well as operating its own AI infrastructure, the SNS AI Factory.
Launched in March 2025 in collaboration with Nvidia and Dell Technologies, the facility is located at Telekom Malaysia’s Klang Valley Data Centre in Cyberjaya.
It is equipped with 64 Nvidia Hopper GPUs across eight Dell PowerEdge XE9680 servers.
Through the facility, SNS provides GPU-as-a-Service to enterprises, government agencies and research institutions, allowing customers to access high-performance computing resources locally.
Ko said the company’s annual GPU procurement varied according to customer demand and project requirements, rather than a fixed import volume.
“Our GPU procurement varies from year to year, depending on customer demand, project requirements and the types of AI servers being deployed.
“We do not work towards a fixed annual import volume, as procurement is generally tied to confirmed orders and the specifications required for each project,” he said.