Exclusive: U.S. Pushes for AI Chips with Military-Grade Location Tracking—Privacy Nightmare or Tech Breakthrough?

The Pentagon's latest moonshot? Baking hyper-accurate GPS into next-gen AI processors. Because what could go wrong when your chatbot knows exactly where you're hiding your crypto keys?

Silicon Valley's about to get a new marching order—one that'll make advertisers drool and privacy advocates riot. The play? Turning AI accelerators into de facto surveillance tools under the guise of 'innovation.'

Meanwhile in finance: Hedge funds are already pricing in the arbitrage opportunities—trackable chips mean trackable supply chains, and Wall Street loves nothing more than a good ol' data asymmetry play.

Kratsios urges countries to adopt U.S. technology

🇺🇸 🇨🇳 U.S. PLANS LOCATION TRACKING TECH FOR AI CHIPS TO BLOCK CHINA

Washington is working with chipmakers on adding advanced location-tracking to AI chips, aiming to stop smuggling and keep U.S. tech from reaching China.

A senior official told Bloomberg this is part of a… https://t.co/vEmRXFh6Zp pic.twitter.com/VuWPkeJ9tg

— Mario Nawfal (@MarioNawfal) August 5, 2025

Kratsios acknowledged that the U.S. is in discussions about installing better location trackers on AI chips. He added that it was something U.S. officials explicitly added in the U.S. AI action plan last month.

The WHITE House spoke at the APEC Digital and AI Ministerial Meeting in South Korea and urged the region to adopt U.S. technology. He mentioned that the U.S. was preparing federal financing tools to support AI tech exports to approved countries.

“The next trailblazing breakthrough will be made with and on American technology, and to fully harness them, you will want America’s AI infrastructure already in place.” – Michael Kratsios, Director of the White House Office of Science and Technology Policy.

China has always rallied against alleged U.S. surveillance and the administration’s efforts to limit its tech industry. The country’s cyberspace administration summoned Nvidia representatives last week to discuss U.S. efforts towards incorporating location-tracking to its H20 chips. 

Beijing is also worried about semiconductor sanctions designed to counter the country’s AI companies, such as Huawei Technologies and DeepSeek. The TRUMP administration plans to remove export restrictions on Nvidia’s chips to China as part of a trade agreement to secure sales of rare-earth minerals to the U.S. 

Nvidia mentioned on Tuesday that it distances itself from any backdoors or kill switches in its chips, noting that they undermine trust in U.S. technology. The company argued that using backdoors, kill switches, or spyware doesn’t mirror the company’s systems, which are built on trust.

Kratsios also championed China’s AI action plan, saying that each country should set its own standards for regulating artificial intelligence. The country’s AI action plan includes forming a global organization to devise governance and technology standards. The White House official also believes the U.S. model will be the most attractive since it puts innovation first.

U.S. charges Chinese nationals in Nvidia chip smuggling

The FBI arrested two Chinese nationals on Saturday on charges alleging they knowingly exported to China tens of millions of sensitive microchips used in artificial intelligence (#AI) applications, in violation of the Export Control Reform Act. Details: https://t.co/Z05cXhQsg4 pic.twitter.com/Y1yC5aJQwm

— FBI Los Angeles (@FBILosAngeles) August 5, 2025

The White House also acknowledged that it’s still working to mitigate the smuggling of chips to China. Kratsios said he’s not yet confirmed from either Nvidia or Advanced Micro Devices about the exploration of location-tracking capabilities.

The U.S. has also charged two Chinese nationals with smuggling millions of dollars’ worth of advanced Nvidia chips to Beijing. The U.S. Department of Justice alleged that Chuan Geng and Shiwei Yang illegally exported Nvidia GPUs to China from October 2022 to July 2025. 

The DOJ referred to export records, which showed that the duo orchestrated around 21 shipments to companies in Malaysia and Singapore through their California-based company, ALX Solutions. According to the report, the 28-year-olds allegedly exported a shipment of Nvidia H100 chips in December 2024 without the necessary licence from the U.S. Department of Commerce.

Prosecutors also found that ALX Solutions received payments from companies in Hong Kong and China. Records showed that the firm received roughly $1 million from a China-based company in January 2024, instead of the company taking delivery.

The DOJ also found incriminating evidence last week from ALX Solution’s office and Geng and Yang’s phones, including communications about chip shipments to China through Malaysia. The duo could face a maximum penalty of 20 years in prison if convicted under the Export Control Reform Act.

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