The serious dustup over Nvidia chip exports to China exploded this week with a gripping story involving Nvidia’s founder and (now former) CEO Jensen Huang.
Specifically, a romantic relationship with Alice Huang (no relation), an alleged Chinese spy and CEO of a Singapore-domiciled company that is an Nvidia client. It seems that some advanced Nvidia chips eventually made their way from Singapore to China.
Importantly, the Wall Street Journal reported that as recently as the summer of last year, Singapore was one of Nvidia’s biggest markets, generating 22% of the chip maker’s revenue, up 81% from a year earlier. Then, it abruptly disappeared from the company’s financial disclosures.
This revelation ties together the current U.S. advanced chip export ban to China plus the possibility that classified intelligence regarding either the U.S. government or Nvidia was compromised.
The media is intensively following up on this, and other allegations are possible. Senators Warren and Coons are already in action regarding hearings.
The Nvidia mess could also negatively impact the forthcoming Anthropic (ANT) IPO.
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This story is evolving day by day as Nvidia (NVDA) stock is already down sharply over the last month. The downside risk is significant, and the blast radius in the AI world and Washington will widen considerably if it is confirmed that Jensen Huang shared sensitive or classified information.
Nvidia is at the center of AI – the linchpin of the AI story.
Due to the company’s dominant market position in advanced AI chips, a strong balance sheet, close ties to Washington power players, a high growth rate, and extensive circular vendor and shadow financing, it is also essentially the central bank of AI, something that Bloomberg explored in great detail last year.
It is fine to buy some Nvidia (NVDA) stock on current weakness, but I advise caution as events can take an uncertain turn and the Nvidia board has already taken the step of naming a replacement interim CEO, Colette Kress.
Regarding Alice Huang, more and more is coming out regarding her past operations and connections to a wide variety of Chinese businesses and organizations.
The infographic on this page from The Wire China connects the dots.
Chinese tech firms are now leapfrogging across industries and sectors, moving from smartphones to EVs to robotics. EVs, drones, and robotics share many of the same core components, like batteries, sensors, and electronic controllers. These days, nearly every major Chinese tech firm has its own AI models, custom chips, and robots. You might call them physical AI conglomerates. Xiaomi (XIACY) recently claimed to have its own humanoid robots doing autonomous 8-hour shifts on its EV production line.
The chief benefactor of the Nvidia mess is China, and particularly Huawei. In 1984, Shanghai Bell was the first China telecom equipment joint venture, and other joint telecom ventures with foreign companies soon followed, including Huawei. By the 1990s, China had successfully shifted from importing telecom equipment to producing most of it domestically through these joint ventures.
Huawei now stands at the heart of China’s advances and ambitions. Founded in 1987 as a small supplier of telephone switches, Huawei has transformed into a manufacturing and digital giant with over $100 billion a year in revenue. A partial subsidiary is currently providing undersea cables connecting three continents and semiconductor chips.
It is time for a new, permanent Nvidia CEO to bring in a new, tighter operating system. The stock may rise on such an announcement.
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