The Gamers Nexus GPU Blackmarket deep dive was great at digging into this.
<a href="https://www.youtube.com/watch?v=1H3xQaf7BFI" rel="nofollow">https://www.youtube.com/watch?v=1H3xQaf7BFI</a><p>And the entire Bloomberg takedown drama added fire to the flames.
It's sad to see what's happened to SuperMicro. They were one of the few vendors of server-grade hardware fitting standard ATX, mATX, and ITX form factors. In my experience their hardware was always better than the others who attempted to do the same (Gigabyte, Asus, ASRock). These days, motherboards with the features I want are going to be on AliExpress. Ironic considering this latest news is about putting trade barriers between the US and mainland China.
How do you even find motherboards on AliExpress properly? Do you have a methodology to split the chaff from the wheat?
You either become an Apple or you eventually circle the drain competing to zero margins which forces 'other methods' of generating growth.
And ideal effective market must have a zero margins. That's normal, what the economy strives for, what customers want.<p>If some market has large margins, it means it has some inefficiencies.
Remember when Singapore buyers were an abnormally high percentage of nvidia's revenue? You have to wonder if these companies are this brazen because they know the DoJ will have political pressure not to nuke the bubble which is more important than being China hawks.
The timing is brutal - SMCI already had the accounting restatement scandal in 2024, spent months fighting delisting, finally got somewhat rehabilitated in the AI infrastructure boom... and now this. 25% single-day drop on a company that was already trading at a discount to peers tells you the market was still pricing in tail risk. For anyone tracking institutional holdings - the 13F filings from Q4 showed several funds adding back SMCI after the accounting mess cleared up. Those bets just got very painful.
I'd been assuming that the Chinese AI labs producing excellent LLMs despite the NVIDIA export restrictions was due to them finding new optimizations for training against the hardware they had access to.<p>I wonder if any of those $2.5B of smuggled chips ended up being used for those training runs.
combination of both, they published papers so we can clearly see they are not just duplicating old methods but coming up with new optimizations. ... yet we can't rule out that they used Nvidia. I don't even see how the export restrictions work, it's stupid. A Chinese company can go to another country, say France or Canada, setup a business buy a bunch of GPUs then make it available to their subsidiary in China. The export restrictions doesn't restrict usage/sharing/renting as far as I know...
The answer is, of course lol?<p>Gamers Nexus did a whole deep dive which basically proved that Chinese researchers had access to whatever they wanted.<p><a href="https://youtu.be/1H3xQaf7BFI?si=ojlxOC7uiPqZxv0N" rel="nofollow">https://youtu.be/1H3xQaf7BFI?si=ojlxOC7uiPqZxv0N</a>
Some of the big LLM labs have written about their training hardware.<p>DeepSeek v3 was trained on 2,048 NVIDIA H800s. <a href="https://arxiv.org/abs/2412.19437" rel="nofollow">https://arxiv.org/abs/2412.19437</a><p>MiniMax M1 used 512 H800s. <a href="https://arxiv.org/abs/2506.13585" rel="nofollow">https://arxiv.org/abs/2506.13585</a><p>The H800 wasn't banned in the first round of export controls - but was after October 2023: <a href="https://www.cnbc.com/2023/10/17/us-bans-export-of-more-ai-chips-including-nvidia-h800-to-china.html" rel="nofollow">https://www.cnbc.com/2023/10/17/us-bans-export-of-more-ai-ch...</a><p>Z.ai say they used Huawei hardware: <a href="https://www.theregister.com/2026/01/15/zhipu_glm_image_huawei_hardware/" rel="nofollow">https://www.theregister.com/2026/01/15/zhipu_glm_image_huawe...</a><p>Qwen and Kimi haven't disclosed their hardware as far as I can tell.
I'm kindof surprised by this take.<p>Did you think the hesitancy of westerners engaging and relying on Chinese labs was due to vibes? There are fundamental cultural differences at play, wether we are comfortable admitting that or not.
Simon, love your work. Hope this is sarcasm. If not, imagine the opposite: Sam Altman and co suddenly started producing tons of content about how smart they are in Mandarin. Why do they even need a story to begin with, let alone one they push halfway around the world?<p>The $2.5B number is just these guys. It could be 10x in total.
Maybe it's time to re-visit that "spy chip" story from almost a decade ago.<p>Edit: Officially-debunked, I should note
So, good time to buy on the panic?
If you do, you could protect yourself with a sell stop below $17.25... because if it breaks that on weekly candles, next are $14 and $10. Or you could buy some calls instead when the volatility calms down. If you do it now, the volcrush could happen even if you're correct.<p>Not investment advice, do you own research. I'm just someone on the Internet.
I've had my own dealings with this awful company. Including Wally.<p>Let's just say that none of this comes as any surprise.<p>Now, what people should be asking is how much Jensen knew. In May he said there was nothing going on. But the videos of the Chinese guy holding H1/200's ... never got to him?<p>Also interesting how they waited until just after GTC...
They need a new logo.
<a href="https://substack.com/home/post/p-191531928" rel="nofollow">https://substack.com/home/post/p-191531928</a>
Oof. SuperMicro also had it's hardware supply chain compromised back in the 2010s [0][1][2][3]<p>[0] - <a href="https://www.bloomberg.com/news/features/2018-10-04/the-big-hack-how-china-used-a-tiny-chip-to-infiltrate-america-s-top-companies" rel="nofollow">https://www.bloomberg.com/news/features/2018-10-04/the-big-h...</a><p>[1] - <a href="https://www.bloomberg.com/features/2021-supermicro/" rel="nofollow">https://www.bloomberg.com/features/2021-supermicro/</a><p>[2] - <a href="https://www.schneier.com/blog/archives/2021/02/chinese-supply-chain-attack-on-computer-systems.html" rel="nofollow">https://www.schneier.com/blog/archives/2021/02/chinese-suppl...</a><p>[3] - <a href="https://www.theinformation.com/articles/apple-severed-ties-with-server-supplier-after-security-concern" rel="nofollow">https://www.theinformation.com/articles/apple-severed-ties-w...</a>
Those claims were never confirmed, no? Some of it might be true or trueish but I'm not talking Bloomberg's anonymous sources word for it, and with so much supermicro gear out there you would think some other evidence would show up.
It depends on what you consider confirmed. It was kind of corroborated, at least. There was a CEO of a hardware security firm that came forward after the original article. He claimed that his firm had actually found a hardware implant on a board during a security audit. It wasn't exactly as Bloomberg described, though.<p>His take was that it was very unlikely that it impacted exclusively Supermicro, though.<p>It was covered various places, including The Register
<a href="https://www.theregister.com/2018/10/09/bloomberg_super_micro_china_spy_chip_scandal/" rel="nofollow">https://www.theregister.com/2018/10/09/bloomberg_super_micro...</a>
I don't think it was a confirmed story. That is, the tiny "grain of rice" size Ethernet module that CEO of a security audit company allegedly found, was not present in other SuperMicro servers. SuperMicro itself, as well as it's buggest customers did not confirm the findings.<p>From what i recall, the story was very vague, there were no pictures of the specific chip, no pictures of the motherboard of the motherboard that would include serial, i.e. no details that would accompany a serious security research.
A supply chain attack similar to Supermicro's would be much more targeted and recalls with national security implications do get flagged via a separate chain.
Bloomberg's claims sound like science fiction: <a href="https://www.servethehome.com/investigating-implausible-bloomberg-supermicro-stories/" rel="nofollow">https://www.servethehome.com/investigating-implausible-bloom...</a><p>Bloomberg's tech coverage is not great from what I've seen. Last year they published a video which was intended to investigate GPUs being smuggled into China, but they couldn't get access to a data center so they basically said we don't know if it's true or not. Meanwhile an independent Youtuber with a fraction of the resources actually met and filmed the smugglers and the middlemen brokering the sales between them and the data centers. Bloomberg responded by filing a DMCA takedown of that video.
What Bloomberg proposed - sniffing the TTL signal between BMC and boot ROM and flipping a few bits in transit - is far from science fiction. It would be easy to implement in the smallest of microcontrollers using just a few lines of code: a ring buffer to store the last N bits observed, and a trigger for output upon observing the desired bits. 256 bytes of ROM would probably be plenty. Appropriately tiny microcontrollers can also power themselves parasitically from the signal voltage as <a href="https://en.wikipedia.org/wiki/1-Wire" rel="nofollow">https://en.wikipedia.org/wiki/1-Wire</a> chips do.<p>Something similar has been done in many video game console mod chips. IIRC, some of the mod chips manage it on an encrypted bus (which Bloomberg's claims do not require).<p>Here's one example of a mod chip for the PS1 which sniffs and modifies BIOS code in transit: <a href="https://github.com/kalymos/PsNee" rel="nofollow">https://github.com/kalymos/PsNee</a><p>"On PsNee, there are two separate mechanisms. One is the classic PS1 trick of watching the subchannel/Q data stream and injecting the SCEx symbols only when the drive is at the right place; the firmware literally tracks the read pattern with a hysteresis counter and then injects the authentication symbols on the fly. You can see the logic that watches the sector/subchannel pattern and then fires inject_SCEX(...) when the trigger condition is met.<p>PsNee also includes an optional PSone PAL BIOS patch mode which tells the installer to connect to the BIOS chip’s A18 and D2 pins, then waits for a specific A18 activity pattern and briefly drives D2 low for a few microseconds before releasing it back to high-impedance. That is not replacing the BIOS; it is timing a very short intervention onto the ROM data bus during fetch."
Didn't that turn out to be incorrect?<p>Multiple security companies looked into this and found nothing malicious.
From thousands of miles away you can hear the fans at the NSA data center as they spin up checking the background to all responses to this posting.