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Malaysia Investigates Chinese Firm’s Use of Nvidia AI Chips Amid Export Controls

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Malaysia’s trade ministry is currently investigating reports that a Chinese company operating in the country is using Nvidia AI chips and servers for training large language models, according to a ministry statement on Wednesday. The inquiry aims to determine if any domestic laws or regulations have been violated.

The Wall Street Journal previously reported that Chinese engineers arrived in Malaysia in early March carrying suitcases filled with hard drives. They were reportedly working to develop AI models using data centers equipped with Nvidia chips.

These developments come against the backdrop of U.S. restrictions on exports of advanced AI chips, introduced during the Biden administration, which capped the number of AI chips Malaysia could receive. Though the Trump administration later rescinded these curbs, it issued guidance emphasizing licensing requirements if AI chip use is linked to weapons of mass destruction.

Malaysia’s ongoing verification reflects growing global scrutiny over technology transfer and AI development involving Chinese entities.

Energy Majors Boost Gas Investments in Southeast Asia to Power Growing AI Data Centers

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Major energy companies are significantly increasing investments in natural gas exploration and production across Malaysia and Indonesia to meet the surging electricity demand driven by expanding populations and a rise in data centers in Southeast Asia.

At the Energy Asia conference in Kuala Lumpur, Shell announced plans to invest an additional 9 billion ringgit ($2.12 billion) in Malaysia over the next two to three years to bolster gas production. Shell CEO Wael Sawan highlighted the urgent need to replace an expected 20% drop in regional gas output by 2035, identifying liquefied natural gas (LNG) as the most practical solution due to existing infrastructure.

French energy giant TotalEnergies recently expanded its stake in Malaysian gas assets through acquisitions from state-owned Petronas, emphasizing the region’s growing energy needs as population and industrial demand increase. Italian company Eni, together with Petronas, is preparing a joint venture to further develop gas fields in both Malaysia and Indonesia, with a formal agreement anticipated by year-end.

Japanese firm Inpex has reentered the Malaysian market, focusing on offshore exploration near Sarawak and Sabah while continuing work on Indonesia’s Abadi LNG project. CEO Takayuki Ueda noted that LNG demand will rise steadily until 2040 and possibly beyond, driven by local consumption strategies amid geopolitical uncertainties.

U.S.-based ConocoPhillips also plans investments in Malaysia’s Sabah region after withdrawing from a previous project in Sarawak, signaling continued interest in Southeast Asian gas development.

Natural gas and LNG are seen as vital fuels to replace coal-fired power plants and reduce emissions, while providing stable, reliable energy for the growing network of power-intensive data centers supporting artificial intelligence and cloud services.

Petronas CEO Tengku Muhammad Taufik Tengku Aziz confirmed the company is focused on meeting the expected doubling of global data center power demand to 945 terawatt hours by 2030, aligning energy strategies accordingly.

Energy expert Daniel Yergin of S&P Global emphasized that natural gas is becoming increasingly essential, stating countries cannot meet growing electricity needs and support data center growth without expanding gas production.

NAACP Threatens Legal Action Against Elon Musk’s xAI Over Memphis Data Center Pollution

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The NAACP, in coordination with the Southern Environmental Law Center (SELC), has issued a formal notice to Elon Musk’s AI company xAI, signaling its intent to sue over alleged violations of federal environmental laws tied to air pollution in South Memphis.

According to the SELC’s notice sent Tuesday, xAI has deployed methane gas turbines at its Memphis data center without the necessary permits or installation of “best available” pollution control technology. These turbines are reportedly in violation of the Clean Air Act, and their emissions, the SELC claims, are worsening already poor air quality in the predominantly Black and underserved Memphis community.

Key Allegations:

  • xAI installed 35 gas turbines, nearly all operating without required environmental permits as of April.

  • Though the company has since removed some smaller turbines, it also installed three larger units recently, further escalating emissions.

  • The SELC and NAACP argue that methane pollution from these turbines poses a significant public health risk, as methane is a potent greenhouse gas.

“These turbines have pumped out pollution that threatens the health of Memphis families,” said Patrick Anderson, Senior Attorney at SELC.
“This notice paves the way for a lawsuit that can hold xAI accountable for its unlawful refusal to get permits for its gas turbines.”

xAI has responded, stating that its temporary power generation units are in compliance with applicable laws and that the company is committed to environmental responsibility. However, critics argue the startup is leveraging fossil-fuel-based infrastructure to rapidly scale AI computing power, reflecting an industry-wide challenge where AI’s energy demands outpace clean energy development.

Broader Context:

Data centers powering AI systems require vast and continuous electricity. As demand grows, energy-hungry AI firms increasingly rely on natural gas and coal-powered infrastructure, especially in areas with underdeveloped clean energy grids.

This case is likely to bring broader scrutiny to the environmental footprint of AI startups and could set a precedent for how environmental justice intersects with big tech’s rapid expansion into communities with historically poor air quality.