The US is planning to introduce legislation that would make it mandatory for manufacturers of high-performance AI processors to add geographical location tracking to their products. This is reportedly being done to stop advanced AI components from falling into the hands of China. 

Remember, the US government has already placed several export restrictions on advanced AI chips, including Nvidia’s H100 and A100. However, this geographical tracking takes things a notch higher.

As per reports, US officials are worried about increasing instances of AI tech smuggling, which means these chips ultimately end up in China in one way or another. The recently launched Hunyuan-Large AI model was also reportedly trained on Nvidia H20 GPUs, which are export-controlled. This reconfirms America’s fear of China using illegal channels to source these chips.

This is why Senator Tom Cotton of Arkansas has introduced a bill that would allow the Commerce Secretary to impose location controls on these companies. The bill covers high-performance AI processors, including the GeForce RTX 4090 and RTX 5090, as well as other AI chips.

The companies will be required to embed tracking technology in all high-end processor modules, including products that have already been developed. Companies will have six months to comply with these requirements after the bill is enacted.

The US also suspects that China might procure these restricted chips from other export-free countries on the US list. That is why the bill aims to meticulously verify the ownership and location of regulated processors.

In a nutshell, the US government has banned the export of certain products to China, and the products that are allowed to be exported will now be embedded with live location tracking.

Location Tracking Might Be a Bit of an Overkill

If this bill comes into force, a one-year study will be conducted jointly by the Department of Commerce and the Department of Defense to explore additional protective measures. The departments will also conduct annual assessments for three years after the bill becomes law.

If the additional measures are considered appropriate, the Department of Commerce will work on them to finalize rules within the next two years. This means location tracking isn’t really the final nail in the coffin. The US might be planning to launch more such control measures in the next few years.

While one can understand the rationale behind tracking the location of each US-made chip, this seems to be a bit of overkill. After all, such a ‘dictatorship’ move can be detrimental to free trade in the technology space. Companies like Nvidia, AMD, and Intel will have to spend billions to incorporate this technology, and even after that, they will have little control over whom they can sell to.

It’s as good as the government tightening its control on these companies, which are essentially becoming playthings for the US government in the overall global foreign trade policy. Today, the US has a problem with China, so it’s implementing such draconian measures. Tomorrow, if there is a conflict between the US and the UK or the US and the EU, who’s to say that the government will not use this law to twist arms?

Nvidia is expected to be hit the hardest. 13% of Nvidia’s total sales come from China, which is around $17 billion as of January 2025. Plus, the tech giant is already sitting on orders worth $18B in the current year.

Furthermore, the company is already planning to export a downgraded version of the H20 chip with lower computing power, which will fall outside the purview of the proposed export controls. However, the US might very well block this move or require location tracking on these chips as well.

Another issue with the proposed bill is the time period of the tracking. When does it stop? Does it stop at all? This could result in massive privacy scares, as retail customers using these trackable, tech-embedded products would, at all times, have their location exposed to the US authorities. 

US Export Regulations Are in a Mess

The US export policy is currently as confusing as it has ever been. With arbitrary tariff rate increases, export bans, and now location tracking, the US is leaving no stone unturned to ensure artificial intelligence supremacy. However, this is based on the assumption that China is totally reliant on the US for AI development, which is far from the truth.

For instance, Huawei’s 910C GPU offers the same level of performance as Nvidia’s H100, which was released in 2022. To put it simply, China seems to be just three years behind the US when it comes to AI technology. Nvidia CEO Jensen Huang has also said that China is very close to the US.

Plus, now that China has finally started to produce US-comparable chips, it may start catering to the global chip market and export its homemade AI chips to other countries. In that case, these strict regulations may backfire on the US, and it may end up losing a sizable chunk of the global market to China.

So, this begs the question of whether such an extensive and restrictive export policy is actually needed. We have already seen how DeepSeek was built for a fraction of the cost of other AI models. So, China may catch up with the US sooner than expected.

For now, we’ll wait to see if and when this bill comes into force. The concerned companies may also put forward their reservations, and clauses may be worked out before being set into writing.