The only thing that generates more morbidity on Wall Street than the collapse of an empire is the unexpected fall of a titan. The more powerful, richer and connected, the smaller the margin for error, the finer the string, the harder the blow. The Nvidia crisis, fueled by the endless cascade of extramarital affairs of its founder, Jensen Huang, has however quickly gone from being a matter of sex and spy scandals to becoming a political, business and national security problem that reaches to the heart of the Trump Administration.
In the last 48 hours, as new details become known about the behavior of billionaire Huang, but also about how the US Government did little or nothing for a year despite being aware of Beijing's suspicions of spying on the businessman who controls 90% of the cutting-edge chips essential for data centers and AI, an internal struggle has emerged in the White House. One to elucidate who allowed this advanced technology to end up in hands linked to China despite US restrictions.
Yesterday, Treasury Secretary Scott Bessent directly pointed out the Department of Commerce, and specifically its head, Howard Lutnick, for not including on the watch lists companies suspected of facilitating these diversions, companies such as Megaspeed, the one run by Alicia Huang, the lover and alleged spy. The media Axios had advanced it and it was confirmed by Trump's own economic minister. "Yes, there was coordination. The Treasury Department, the War Department, the trade representative and the State Department were in favor of including Megaspeed on the list of entities for months, but Commerce has the final say. They will have to ask them about their internal processes," Bessent said in an interview on CNBC, pointing out clearly.
According to various information, and interested leaks, Lutnick is now under enormous pressure and his continuity is up in the air, while legislators from both parties demand explanations and documentation about the exports. The US is finalizing a new law restricting the sale of chips, one that Nvidia has opposed with all its might throughout this year, and Congress wants Huang to testify, but not just him. Lutnick is the most exposed, since the time of tariffs, and the most noted.
The case has already become a race to find those responsible and a scapegoat within the Administration itself. With the added problem that the president seems completely indifferent to what happened. Perfectly informed about Huang's exposure, Trump not only did not lift a finger, but this week, hours before his forced resignation, he called Huang by phone urging him to resist. Even when he heard the businessman criticize himself and recognize his enormous mistake. "I'm a shit," he even told one of his advisors, as published by Bloomberg.
The earthquake also reveals a much deeper problem for the future of Nvidia: the dependence on its founder and doubts about some of the financial bets that have accompanied the expansion of artificial intelligence. The departure of one of the richest men on the planet has led the board of directors to leave Colette Kress, the financial director, as interim CEO. A board that Huang had disparaged just a few months ago. According to The Wall Street Journal, he called it "a deer caught in the headlights" when Kress questioned the company's multibillion-dollar commitments to AI and data center companies.
Deals brokered by Huang's son-in-law, Nico Caprez, who, according to the Journal, "had been offering financing to emerging cloud service providers and data center developers in hopes of turning them into long-term customers."
The disagreement, in which Huang would have ignored his financial manager, saying that his job was not to give an opinion on the company's strategy, was not minor. Just as entrepreneurs did in 1929, lending money to people to buy shares without any type of control, Nvidia was then studying offering guarantees and financing to companies that needed to buy their own chips, a model that clearly has enormous risks of excessive exposure. She publicly defended Nvidia's direction, despite her reservations. "We recognize the magnitude of this support and we know that some will describe it as circular financing. We see it differently," he said at the end of August. "The return on our invested capital will be excellent." But now she will be the one who will have to manage precisely those risks, reassure investors and demonstrate that Nvidia can move forward without the man who focused its leadership and vision for more than three decades.
And with pressure from Washington, with politicians wanting to wash their hands of it, especially with Trump traveling to China next week. "The real question here should be: Did Nvidia know its customer? Did it go out of its way to ensure that there were no leaks and that they weren't selling to what were obviously shell companies? I think it's important that anyone at the company who was responsible for this be held accountable," Treasury Secretary Bessent said Friday.
