2 scandals, 1 destination - Why Nvidia can’t shake China smuggling allegations

For more than a year, Nvidia CEO Jensen Huang has repeated the party line about covert smuggling of his highly coveted premium chips: There’s no evidence Nvidia AI chips are being diverted to China, Huang has asserted .

But now two bombshell scandals, both allegedly running through Southeast Asia, have blasted a data-center sized hole through Huang’s credibility. The first case, in which $2.5 billion in computer servers equipped with Nvidia chips are under scrutiny, involves Super Micro, a company led by a longtime friend of Jensen Huang’s and one of Nvidia’s closest partners. More recently, a separate string of reports has revealed that Nvidia’s largest Southeast Asian customer, Megaspeed, is under U.S. investigation for chip diversion.

There is no evidence so far that the two cases are directly connected, though some industry observers have pointed to potential areas of overlap. Whether the two cases are ultimately determined to be part of a larger scheme, or completely separate incidents, the dual scandals have left Nvidia, shareholders, and its famous CEO, reeling.

On Sunday, Huang told employees in an email he had betrayed his wife and family in an extramarital affair. His confession followed reports claiming that intelligence officials believe Huang’s affair partner, Alice Huang (no relation), was recruited by China’s Ministry of State Security to purportedly report on his doings to Beijing. Alice Huang is a former executive of Megaspeed International, a Singapore company that reportedly became Nvidia’s largest chip buyer in Southeast Asia.

Alongside Huang’s admission, Nvidia’s board announced it has opened an independent investigation into whether Nvidia co-founder Huang was the target of a foreign intelligence operation but noted that board members maintain “confidence” in Huang. The board said it has no reason to believe that “either national security or Nvidia secrets were compromised.” Nvidia board members have retained acting U.S. Attorney of the Southern District of New York Joon H. Kim and his firm Wachtell, Lipton, Rosen & Katz to run point on the investigation, Nvidia announced Tuesday.

Nvidia’s GPU chips are critical components for training and running advanced AI models such as those made by OpenAI and Anthropic. The U.S. government considers the chips to be dual-use technology with potential military applications, and requires specific export licenses to sell them to countries such as China—which haven’t been granted to Nvidia’s most high-powered chips.

How things will shake out for Nvidia is evolving in real time, but it’s likely that a terse letter Sen. Elizabeth Warren (D-Mass.) sent to Nvidia in June will turn into a subpoena. That’s thanks to midterm election results that saw Democrats regain the Senate with Warren poised to chair the powerful Senate Banking Committee in January. Warren and Sen. Jim Banks (R-Ind.) called Monday for Nvidia to answer questions, and three House committee chairs have asked Huang to accede to a closed-door grilling before lawmakers November 18, the day after Nvidia is scheduled to report its third quarter financial results.