March 5, 2025
KUALA LUMPUR – Malaysia’s burgeoning data centre industry has quickly felt the fallout of Singapore’s probe into Nvidia chips that were allegedly sent to third countries by fraudulently marking Malaysia as their final destination.
Singapore Home Affairs and Law Minister K. Shanmugam revealed on March 3 that the police were investigating whether servers from US firms Dell and Supermicro containing the prized chips used in artificial intelligence (AI) applications ended up in unknown final destinations after being first shipped to Singapore-based companies and then exported to Malaysia.
In a 15-minute period after the news broke on the afternoon of March 3, Malaysian hardware manufacturer NationGate’s share price fell by the maximum daily limit of 30 per cent, shedding RM1.3 billion (S$391 million) in market capital.
The company, which manufactures servers on behalf of the likes of Dell and Supermicro for delivery to Nvidia cloud partners, has since clarified that it has not done business with any of the companies incriminated in Singapore’s probe.
The investigation has so far resulted in two Singaporeans and one Chinese national being charged with fraud on Feb 27.
Nvidia cloud partners are firms recognised by the AI chip giant. They provide software and hardware services to end users using Nvidia products.
On March 4, NationGate recovered about a quarter of the previous day’s losses on the local bourse.
One of the trio charged, Singaporean Alan Wei Zhaolun, is listed as a director of several firms in Singapore, including Achieva Tech Allianz, Altrics Global Services, Aperia Cloud Services and its subsidiaries, A-Speed Infotech and Aurica.
Industry sources told The Straits Times that Aperia Cloud is a major customer for property developer Exsim’s 15MW data centre in Bukit Jalil, a suburb in Kuala Lumpur.
Aperia Cloud, which is Nvidia’s first cloud partner in Asean, had committed to offtaking more than 10MW of Exsim’s capacity, said a financial executive with knowledge of the matter.
Offtake deals are crucial to obtaining financing for data centre projects as they guarantee revenue and the ability of the data centre owner to pay debts.
“Exsim may need to terminate its deal with Aperia. Then it will need to find other offtakers, perhaps asking customers of its next phase to commit to additional capacity,” the source told ST on condition of anonymity as the information on Exsim’s business dealings is confidential.
Exsim did not respond to ST queries at press time.
Data centres have mushroomed in Malaysia since 2023 with the announcement of RM99 billion in investments, a significant portion involving AI. Another RM149 billion is in the pipeline, according to the Malaysia Digital Economy Corporation.
Investment, Trade and Industry Minister Tengku Zafrul Aziz on March 4 vowed “necessary action”, should the claims of chip smuggling be true.
But he said there was no information that data centre companies operating in Malaysia, including the likes of Amazon, Google and Microsoft, are “not using the chips that they are supposed to be using”.
“They will be held accountable if they are not using (the chips) for themselves,” he said on CNBC’s Squawk Box Asia programme.
Datuk Seri Zafrul added that the authorities, including the police and Customs, are investigating the matter and are in discussion with data centre firms to ascertain whether the servers have gone to the right parties.
Late on March 4, his ministry confirmed in a press statement that the government was “taking the necessary actions to establish whether Malaysian laws had been breached in the alleged shipment of US-sanctioned AI chips from Singapore to Malaysia”.
It added that it will continue to work closely with the US and Singapore to find effective ways to address the issue of trade involving these chips.
The US began looking into the potential circumvention of its export controls for advanced Nvidia chips following the launch of Chinese AI firm DeepSeek’s free AI tool in January that wiped around US$1 trillion (S$1.34 trillion) off the value of US tech stocks.
This came despite the tight restrictions that the US had imposed on semiconductor firms’ exports to China.
Citing a person familiar with the matter, Reuters reported in January that “organised AI chip smuggling to China has been tracked out of countries including Malaysia, Singapore and the United Arab Emirates”.
Lawmakers in the US had singled out Singapore in a letter in January urging National Security Adviser Mike Waltz to subject countries to strict licensing requirements if they were not willing to crack down on shipments to China.
- Shannon Teoh is The Straits Times’ bureau chief for Malaysia, where he has reported on various beats since 1998.