Nvidia scandal intensifies US pressure for stricter AI chip export limits on China

Hong Kong: Long before reports surfaced that former Nvidia CEO Jensen Huang had been involved in an affair with a suspected Chinese spy, the company’s advanced chips were already at the heart of the US-China struggle for dominance in artificial intelligence. Now, the scandal threatens to deepen that rivalry. As President Donald Trump prepares to meet Chinese President Xi Jinping in China next week, lawmakers from both parties in Congress are using the affair to push for tighter restrictions on technology exports in an effort to preserve America’s lead.

“The scandal, in many ways, captures the rivalry, where national security, export controls and foreign policy concerns are all intertwined,” said Lian Jye Su, chief analyst at London-based technology research and advisory firm Omdia. At the centre of the competition to develop the most advanced AI is the race to secure access to the most powerful AI chips. US-led restrictions have blocked China from obtaining the world’s most advanced AI chips, a policy that has prompted Beijing to accuse Washington of trying to create an AI monopoly.

Nvidia once held roughly 95 per cent of the Chinese market, but its sales to China have fallen sharply because of export restrictions first introduced under the Biden administration. After Huang lobbied Washington to ease the limits on Nvidia chip sales to China, Trump earlier this year approved exports of its highly advanced H200 chips, though not the most powerful ones. Trump has spoken admiringly of Huang, who sits at the centre of the AI boom the president has been eager to champion.

The two have remained in regular contact during Trump’s second term, including at least twice this week as the controversy around the tech executive grew. Supporters of stricter export controls now have a new rallying point. Washington’s strategy has largely focused on hardware, with officials believing that if they controlled where Nvidia’s best chips from California were sent, they could control the race for the most capable AI, said Shaoyu Yuan, assistant professor at New York University’s Center for Global Affairs.

That approach helped slow Chinese companies, Yuan said, but it assumed the main threat was the physical hardware itself rather than access to people like Huang. Yuan added that China hawks in Congress, who have long supported tougher oversight and stronger export controls, will now have a story with a name and a face behind it to bolster their case. “I don’t think anybody in Washington wants to be seen as loosening the controls on chip exports to China right now,” he said.

This week, several congressional Democrats wrote to Commerce Secretary Howard Lutnick seeking information on what officials knew about Huang’s affair with the reported Chinese spy, and demanding an immediate halt to exports of advanced AI chips to China. Lawmakers from both parties have grown more vocal in calling for tougher measures to stop China from accessing advanced US chip and AI technologies. The Senate version of a defence policy bill would allow Congress to review licences for advanced AI chip sales to China, empower the Commerce Department to track AI chips to prevent diversion to unauthorised regions, and require US allies to match American restrictions on exports to Chinese chipmakers.

Beijing, meanwhile, has warned Washington not to use the episode as justification for new restrictions. Chinese Foreign Ministry spokesperson Mao Ning told reporters on Thursday that the US should stop inventing “Chinese spy” narratives as a pretext for imposing technology limits. China and the US have been seeking common ground on AI safety.

The woman reportedly involved with Huang is Alice Huang, a former executive at Singapore-based cloud computing company Megaspeed. According to reporting by The New York Times, US officials suspect she was a Chinese spy recruited to influence Nvidia into making its most advanced chips more accessible to China. Beijing has denied that she was a spy and called the allegation unsubstantiated.

According to senior US officials who briefed reporters on Friday on condition of anonymity under White House ground rules, Trump does not plan to raise the Nvidia issue directly with Xi. The officials also said they do not expect Chinese retaliation if loopholes in existing rules blocking China from smuggling or using advanced computer chips are closed. Huang has been a frequent visitor to the White House.

In May, he even boarded Air Force One in Alaska at the last minute, joining Trump for a state visit to Beijing, where he drew attention by sampling street food. He and his wife, Lori, were seated at the head table with the two leaders when Trump hosted Xi in Washington in September. At a tech summit that same month, Huang took a call from the president while appearing live on stage.

At the same time, the US and China have agreed in principle to set up a hotline for AI-related national security incidents. Kyle Chan, a fellow at the Washington-based Brookings Institution, said the Nvidia scandal — and the possibility of new US export controls — could complicate the AI talks. The key question, he said, is whether Beijing can separate export controls from the AI safety discussion, or whether it will view them as linked.

The US-China technology race continues. The two countries are advancing AI in different ways. US companies are pursuing the frontier of AI using cutting-edge chips and the country’s rapidly expanding data-centre infrastructure.

China, meanwhile, is aiming for broader global adoption of its open-source, more affordable models. More and more experts say China is becoming a counterweight to the US in AI and is narrowing the gap in the technology race. But analysts say advanced Nvidia chips and other technology remain essential for many Chinese AI companies and research efforts.

Chinese chipmakers, including Huawei, have made rapid progress in reducing the gap by finding ways around US restrictions, including by clustering large numbers of less advanced domestic chips. Still, analysts say Nvidia’s top-end chips remain superior in single-chip performance and continue to outperform Chinese alternatives in training advanced AI models. China’s push for technological self-reliance may also be contributing to a reluctance to buy larger volumes of American chips.

Even after the US approved sales of some H200 chips to China, Nvidia said earlier this year that it had shipped only a limited number there. The Huang episode could ultimately give China’s domestic chip industry fresh momentum, said Rui Ma, founder of Tech Buzz China and a China tech expert. For Beijing, the fallout only adds urgency to building a domestic semiconductor supply chain.

That was already a strategic priority, but if access to Nvidia’s computing power becomes even more restricted, Chinese companies will have even fewer alternatives, Ma said. Orissa POST – Odisha’s No.1 English Daily