Asian Proxies Help China Steal America's AI Power Through Sanctions Evasion

America’s technological edge is under siege, and the battlefield is Asia’s data centers. Chamath Palihapitiya, a sharp-eyed tech investor, recently flagged a disturbing trend: Asian countries are snapping up graphics processing units (GPUs) at a pace that far outstrips their power capacity to use them. The numbers don’t lie. China, alongside nations like Singapore and Malaysia, is amassing these critical AI components in quantities that defy logic. This isn’t just market exuberance; it’s a calculated move by Beijing to skirt U.S. restrictions and bolster its AI ambitions.

The stakes couldn’t be higher. GPUs are the backbone of artificial intelligence, powering everything from military simulations to autonomous systems. If China secures a stranglehold on these chips through covert means, it’s not just a tech issue; it’s a national security crisis. Palihapitiya’s warning, aired on his All In podcast, points to a shadowy strategy: shell companies and proxy buyers in nearby Asian nations are funneling GPUs into China, evading American export controls with alarming ease.

This isn’t speculation. Data backs it up. In 2025, Chinese tech giants like Alibaba and Tencent spent over $16 billion on Nvidia’s H20 GPUs in just one quarter, a sixfold surge from the previous year. Meanwhile, Singapore’s GPU purchases skyrocketed from $2.29 billion in 2023 to $23.68 billion in 2025. That kind of jump raises red flags. Singapore, with its limited land and power grid, can’t possibly need that many chips. The real destination? Likely China, hidden behind a web of intermediaries.

What’s at play here is a high-stakes game of geopolitical chess. While American policymakers focus on tightening export rules, Beijing is playing three moves ahead, exploiting loopholes and leveraging Asia’s booming data center market to fuel its AI race. The question isn’t whether China’s cheating the system; it’s how much they’re getting away with.

Asia’s data center boom provides the perfect cover for China’s GPU grab. The region is the world’s fastest-growing market for data centers, with $37 billion invested in Southeast Asia alone to add 8 gigawatts of power capacity. China leads with 449 data centers, but countries like Malaysia, Indonesia, and Thailand are catching up fast. These nations offer cheap energy and lax oversight, making them ideal hubs for rerouting tech. Yet, their GPU buying spree doesn’t match their actual power infrastructure. Malaysia, for instance, is building data centers, but nowhere near enough to justify the volume of chips it’s importing.

Nvidia’s own numbers tell a damning story. While China’s official GPU purchases are massive, the tenfold surge in sales to Singapore suggests a rerouting scheme. Reports confirm that some GPUs sold to Singaporean entities are ending up in restricted countries, with China as the likely beneficiary. This isn’t a one-off; it’s a pattern. Shell companies, often set up in places like Hong Kong or Macau, obscure the true buyers, making it nearly impossible to track the chips’ final destination.

Beijing’s urgency is no mystery. With U.S. export controls tightening—new restrictions on H20 chips kicked in this May—Chinese firms are racing to stockpile GPUs before the door slams shut. These chips aren’t just for tech startups; they’re critical for military applications, from surveillance to cyberwarfare. Allowing China to amass them unchecked is like handing over the keys to America’s digital future.

Some argue this is just global trade at work, with Asian nations legitimately boosting their AI capabilities. But that view ignores the mismatch between GPU purchases and power capacity. Singapore’s data centers, for example, consume just 7% of its electricity, yet its GPU imports rival those of much larger economies. The math doesn’t add up unless you factor in diversion to China. Dismissing this as harmless market growth is naive at best, dangerous at worst.

The implications hit hard. Every GPU diverted to China strengthens its hand in the AI arms race, eroding America’s technological lead. The U.S. has already tightened export controls, with tariffs as high as 145% on Chinese tech goods, but Beijing’s countermeasures—125% tariffs on U.S. imports and a push for domestic chip production—show they’re not backing down. This isn’t just about trade; it’s about who controls the future of AI, and with it, global power.

Energy consumption adds another layer of concern. AI GPUs are power hogs, with top chips now guzzling 1,200 watts each. Data centers globally are projected to consume 536 terawatt-hours by 2025, doubling by 2030. If China’s proxies are hoarding GPUs beyond their grid’s capacity, it suggests they’re either planning massive, secret data center expansions or stockpiling for future conflicts. Both scenarios spell trouble for American interests.

The counterargument—that China’s just preparing for its digital economy—falls flat when you consider the scale of the purchases and the use of shell companies. Legitimate businesses don’t hide behind opaque intermediaries in offshore havens. This is sanctions evasion, plain and simple, and it’s time America stops underestimating Beijing’s cunning.

America can’t afford to sit this one out. The Biden-era export controls were a start, but they’re not enough. The U.S. needs to crack down on shell companies, starting with stricter oversight of GPU sales to third-party nations. New beneficial ownership reporting rules, effective January 2025, are a step forward, but enforcement must be relentless, especially in jurisdictions known for lax regulation.

Congress and the White House must also prioritize domestic semiconductor production. Relying on Taiwan and South Korea for chips leaves America vulnerable. The CHIPS Act was a good first move, but it’s time to double down, ensuring the U.S. can outpace China in both innovation and output. Meanwhile, allies like Japan and South Korea, who are ramping up their own GPU production, should be brought into a tighter trade alliance to counter China’s influence.

The road ahead is clear. America must protect its technological supremacy by closing loopholes, boosting domestic manufacturing, and holding China accountable. Anything less risks ceding the AI frontier to a rival that plays by its own rules.