Nvidia scandal weakens thesis on chip sales to China

For two years, Jensen Huang, founder and chief executive of Nvidia, repeated the same idea in Washington. Selling AI chips to China would keep the Chinese dependent on American technology. Prohibiting sales would push the country to make its own chips and strengthen Huawei, the main Chinese manufacturer in the sector.

The thesis convinced Donald Trump, who last December approved the sale of the H200, the most powerful chip from Nvidia's previous generation. After listening to the executive, Congress shelved a proposal that would limit sales abroad.

Since last Sunday (8) his main defender has lost credibility. It was the day that Jensen Huang admitted to an affair with Alice Huang (no relation), a former executive at Singapore-based Megaspeed. According to the New York Times, American intelligence suspects that she was collecting information for Beijing.

Nothing has been proven, and Singapore denies investigating her links to Beijing. In politics this doesn't matter. The executive had direct access to the Oval Office and traveled in Trump's entourage to Beijing in May.

When he talked about export controls (the rules that require a government license to sell advanced chips to China), he had more authority than the Commerce Department technicians who grant those licenses. He was a personal authority that cannot resist suspicion of espionage.

The matter must leave Trump's office and return to Congress, which will have a Democratic majority from January. A group of senators from both parties led by Elizabeth Warren is calling for a project that gives the Legislature the power to block chip exports. Hakeem Jeffries, the Democratic leader in the House, wants limits on the annual military budget bill, where Congress usually fits trade restrictions.

Megaspeed purchased billions of dollars worth of equipment from Nvidia and is being investigated by the Department of Justice on suspicion of diverting chips to China. It became the favorite example of defenders of restrictions.

The most telling reaction came from Beijing, where state media spent the week defending an American executive. On the 9th, the foreign ministry spoke of defamation, and the Global Times, a newspaper linked to the Communist Party, asked in an editorial if anyone wanted to provoke a confrontation right after the detente between Xi Jinping and Trump.

The next day the newspaper suggested that the investigation was a witch hunt. On Weibo, a kind of Chinese X, one of the most talked about topics was the end of Huang's image as a devoted husband of 41 years.

This defense has little to do with Nvidia, because it was the Chinese regime itself that advised the country's companies not to buy the H200 shortly after American release. In October, Jensen Huang said that Nvidia's share of the Chinese AI chip market had fallen to virtually zero.

China bet on its own chips even though sales were allowed, which dismantles both halves of the argument. The thesis was refuted by Beijing before being called into question in Washington.

Beijing is protecting the truce in the tariff war negotiated with Trump since last year, built by a few people and through informal channels that never passed through Capitol Hill.

A Congress willing to legislate on chips is precisely the type of actor that this arrangement does not control. Hence the unlikely scene of a Communist Party newspaper coming to the rescue of the man whose chips the Chinese regime ordered not to buy.