Nvidia CEO Jensen Huang has admitted to having an affair, reportedly with a Chinese executive at a Singapore-based company that the United States suspects of smuggling AI microchips into China.
The scandal has focused attention on how China, a major artificial-intelligence power in itself, obtains the cutting-edge chips despite US export restrictions. Nvidia designs advanced components originally created to handle 3D visuals in video games, called Graphics Processing Units (GPUs). These have the power to crunch colossal amounts of digital data, so are also used at scale to train and run artificial intelligence. The policy also allows the United States’s top AI labs to maintain their global lead. Huang has lobbied the U.S. government to allow Nvidia chip sales to China, warning that the restrictions are fuelling the rise of competitive homegrown alternatives.
ChatGPT’s 2022 launch showcased the potential of AI, sparking an investment gold rush as governments and tech giants raced to develop the technology further. With chip orders pouring in, Nvidia’s market valuation has soared to $4.5 trillion — currently on par with Apple as the world’s two most valuable companies.
Washington bans the export of Nvidia’s top-end “Blackwell” and “Rubin” GPUs to China, citing security concerns, as advanced AI has military applications. This year, Washington eased controls on Nvidia’s previously banned — and less powerful — “H200” chip, with the United States taking a 25% cut of sales.
Chips may be smuggled into the country, or accessed through a loophole that allows Chinese firms to rent out computing power at data centres stuffed with Nvidia chips in a third nation, often Southeast Asian. Washington has also accused Chinese AI labs of training systems to mimic the capabilities of US models. And then there is the big question of smuggling. DeepSeek did not respond to a comment request at the time. Huawei is China’s top Nvidia competitor, although it lags behind the U.S. titan, and DeepSeek will reportedly train its next major AI model on Huawei chips.
Huawei said in September its next-generation AI chip would be ready in the first quarter of 2027, three quarters earlier than planned.
“U.S. export controls restrict where a chip is shipped, not who uses it,” explained Stephen Wu, founder of the Carthage Capital investment fund. That means Nvidia GPUs can sit in Malaysia’s Johor region, for example, “in full compliance while a customer in Shenzhen logs in”, Wu told AFP . White House adviser Michael Kratsios said this summer that Moonshot AI had accessed high-end Nvidia chips in Thailand. Tech outlet The Information said in December that DeepSeek developed its new model using thousands of chips dismantled overseas and brought into China. Nvidia told The Information they had not seen evidence of such smuggling which “seems far-fetched”. “Nvidia chips still make top-level AI work faster and easier, but they are no longer the only path,” said Poe Zhao, founder of analysis publication Hello China Tech. “The open question is cost” as “training on Chinese chips usually takes more time and more engineering”. “Chinese-made chips are improving fast”, Su said, with more collaborations likely to come. To boost the power of Chinese-made chips, AI companies need to use more of them, Wu said. “They pay for it in power and cost — which they can afford, because Chinese electricity is cheap and the chips are state-subsidised.”
But U.S. conditions have made it difficult for shipments to be approved, with Beijing also reportedly reluctant to buy H200s as its own chip industry gains momentum. Recent launches of high-performing models from Chinese startups, including Moonshot AI, Z.ai and DeepSeek, have turned up the heat on U.S. rivals.
“Chinese vendors are still using cutting-edge Nvidia chips to train their models” despite the controls, Lian Jye Su, a chief analyst at Omdia, told AFP .
