Nvidia’s friends in Washington are shrugging off CEO Jensen Huang’s affair with a suspected Chinese spy. Regrettable, they say, but men will be men. Well, not so fast. The imbroglio is a stark warning of how the Chinese are seeking to infiltrate the top levels of American business to dominate artificial intelligence.
Investors may worry that the affair, besides being a distracting embarrassment, could invite a government response that limits its chip sales. House Republicans have requested that the CEO appear for a closed-door briefing this month. Ms. Megaspeed was spun off by Chinese video game maker, 7Road Holdings, soon after the Biden team imposed restrictions on AI chip sales to China. Coincidence, comrade? Megaspeed has rented out computing capacity to Chinese companies, including Alibaba. That means Chinese AI companies are able to access Nvidia’s high-powered chips despite export controls. Huang. Chip smuggling and export-control evasion are one reason Chinese open-weight AI models have made rapid progress. U.S. prosecutors this year charged employees and a contractor at Super Micro, a U.S. company, with conspiring to illegally route billions of dollars of AI servers containing restricted Nvidia chips to China. Nvidia’s team has lobbied the Trump Administration with some success to ease export controls, though restrictions remain on its most advanced chips. Possibly, but this overlooks that the Chinese aren’t using AI merely for commercial purposes.
Nvidia shares fell 4.3% Monday after Mr. Huang previously worked at a Chinese state-run media company and founded Megaspeed in 2023. Megaspeed was then sold to a Singapore-based shell company in November 2023.
The U.S. government has investigated Megaspeed over concerns it may also have been involved in smuggling chips into China, according to Bloomberg News. Megaspeed has denied wrongdoing and says it abides by U.S. laws and is surprised by the allegations against Ms. Nvidia says allowing more chip exports will encourage Chinese AI developers to depend on U.S. technology.
Huang on Sunday admitted to and apologized for his affair.
