AI Chip Security Bill Gains Backing From Tracking Firms

Six companies that track international technology shipments have thrown their support behind legislation requiring advanced AI chips to include security mechanisms designed to prevent diversion to China and other adversaries.

The firms sent a letter to congressional leadership Thursday backing the Chips Security Act, which would mandate that exporters of powerful AI chips implement tracking systems to verify where the hardware ends up. The companies argue the requirements would strengthen American competitiveness by giving legitimate buyers confidence they're complying with export restrictions, according to NBC News, which first reported the letter.

Closing a multibillion-dollar loophole

Despite existing U.S. export controls banning advanced AI chip sales to certain countries including China, current enforcement gaps have allowed billions of dollars worth of American chips to reach Chinese entities through third-party intermediaries. In one case this March, the Justice Department charged three individuals with conspiring to forward $2.5 billion worth of AI chips to China.

The proposed legislation would require chip exporters to better track their products through either dedicated location-verification hardware or software running on existing systems. Proponents say this would enable sales to countries like Malaysia or Indonesia without risk of further transfer to restricted destinations.

Industry divided on security mandates

The bill has created a split within the technology sector. The House Foreign Affairs Committee approved the Chips Security Act unanimously in a 42-0 vote in late March, but the legislation faces opposition from major semiconductor companies.

The Semiconductor Industry Association, representing firms including Nvidia and AMD, strongly opposes the bill, arguing that mandating "complex, costly, and unproven security features risks undermining global trust in American semiconductor technologies." These companies worry the requirements would hamper their ability to sell chips internationally.

The six companies supporting the legislation—including GeoComply, Multibeam, and Fortaegis—counter that enhanced verification would actually expand markets by giving policymakers confidence to approve larger deals and broader exports.

"Chip smuggling is actively eroding the export controls by putting advanced AI chips in the hands of our strategic competitors," said Kip Levin, CEO of GeoComply, which provides location verification for companies like Amazon Prime Video and FanDuel.

Why it matters

Advanced AI chips perform the computations required for frontier AI systems, making access to them a critical factor in the global AI race. Chinese AI companies including DeepSeek and Tencent have developed systems trailing American capabilities by only months, with Chinese firms citing chip shortages as their primary development barrier. Closing diversion loopholes could preserve a key technological advantage while the debate over security requirements highlights the tension between national security concerns and commercial interests in the semiconductor industry.

Regulatory action underway

In late May, the Commerce Department's Bureau of Industry and Security moved to close a loophole that had allowed companies to circumvent chip sale prohibitions by routing products through Chinese-owned subsidiaries in third countries. Senators Jim Banks and Andy Kim subsequently sent a letter requesting further action to restrict Chinese subsidiaries' ability to order advanced chips.

The Senate companion legislation to the House bill remains in early stages of consideration. NBC News first reported the details of the industry letter and the companies' positions.