The Nvidia-China war could get hotter, says MAGGIE PAGANO

What a story. One that gets more gripping and more mysterious by the minute. 

One minute Jensen Huang is embroiled in a honeytrap after being accused of having a fling with a suspected Chinese spy, along with two more affairs, and resigns as Nvidia boss.

But then we hear that a political war has broken out in the White House.

Scott Bessent, the US Treasury Secretary, blames Commerce Secretary Howard Lutnick for failing to properly oversee the export of cutting-edge Nvidia chips to Singapore-based Megaspeed.

Like rats in a sack, Bessent points the finger at Lutnick for the delay in putting Megaspeed – where Alice Huang, the alleged Chinese spy and no relation to Jensen, was a senior executive – on Washington’s blacklist because of suspicions that it was smuggling billions of dollars’ worth of chips to Chinese customers.

He also hinted that Nvidia, and therefore Huang, was aware of the smuggling. 

Timing: What makes the Nvidia scandal all the more intriguing is the timing, breaking days after the midterm elections that saw the Democrats triumph

Nvidia’s chips are the West’s trump card in the cold war between the US and China as they power all the large language models such as ChatGPT and Claude.

These graphic processing units (GPUs) are used by AI systems everywhere from corporations to military platforms.

President Donald Trump wanted strict export controls on the chips, particularly those used in military applications.

Nvidia’s Huang lobbied hard for a more nuanced approach, arguing that China was an important market, and ultimately persuaded the administration to allow some sales.

Ironically, it was the Chinese authorities themselves who stopped their biggest companies from buying Nvidia’s chips, persuading them to buy from domestic producers such as Huawei instead.

Indeed, Huang has been so worried about the threat of declining Chinese orders on revenues that he raised it in Nvidia’s latest annual report.

Which is why the story about the Chinese setting Huang up in a honeytrap doesn’t add up.

One more plausible explanation, according to the New York Times, is that Megaspeed, which builds data centres across Southeast Asia, found a way around official Chinese policy and the US blacklist by renting Nvidia’s chips through the back door to customers such as Alibaba, which has developed Qwen, one of China’s most powerful AI models.

That it was Megaspeed rather than official Chinese authorities which established relations with Huang certainly makes more sense than the idea that China was spying directly on him, and suggests that Alice Huang was more a corporate fixer than a spy.

Yet the reason US and Western governments and their alphabet soup of intelligence agencies are now so worried is whether Megaspeed has de facto facilitated the transfer of the latest cutting-edge chip technology to China. As they say, cui bono?

What makes the scandal all the more intriguing is the timing, breaking days after the midterm elections that saw the Democrats triumph.

More pertinently, the Democrats won with a campaign of scepticism towards domestic data centres, more AI regulation and stricter controls on exports to China.

It’s not lost on financial markets that the Democrats want to tighten AI controls just as China is edging the chip cold war.

If the latest gossip is anything to go by, such a stand-off may not last long. 

Elon Musk has already replied to financial blog Zerohedge’s call to hire Jensen Huang, saying: ‘That would be an honour’.

Imagine those two egos together.

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