Jensen Huang is out. What did China want from him?

Today, we’re talking about the Jensen Huang scandal at Nvidia, which is developing so quickly that we had to do an emergency update of this intro minutes before publishing this episode. Huang just resigned from his position as CEO of Nvidia as news of his affairs, including with an alleged Chinese spy, threatened to engulf the company. We’ll have more on that story as things develop and we learn how Nvidia will restructure itself after Jensen — he had something like 60 direct reports, after all, and the entire AI financial ecosystem flows through the company. This is pure Decoder bait. But just two days ago I talked to Kyle Chan, a foreign policy fellow at the Brookings Institution’s John L. Thornton China Center, about the real heart of the scandal: What would China even seek to accomplish by having a spy so close to Jensen? And what does the real state of the US-China AI conflict really looks like, particularly from the Chinese point of view? Kyle’s answers about chips and how China is perceiving the so-called AI “race” were very illuminating, but maybe even more interesting was his observation on Jensen Huang’s relationship with Trump was the most important thing of all — because maybe what China most stood to gain was someone who could whisper in the right ears. Let’s just dive right into it. But keep in mind that when we were talking, we still didn’t know what would happen with Jensen. Okay: Kyle Chan on Nvidia, China, and the future of AI export controls. Here we go. This interview has been lightly edited for length and clarity. Kyle Chan, you are a fellow at the John L. Thornton China Center at the Brookings Institution. Welcome to Decoder . Great to be here. What on earth could we be talking about as it relates to your expertise about China today? I have a lot to ask you about Nvidia, about our relationship to China as a country, as an economy, and about national security. Let’s start at the very beginning. From all the reporting we have today, it seems like the United States government has been very worried about a company called Megaspeed and Alice Huang, the alleged Chinese spy at the center of the swirling scandal around Jensen Huang, the CEO of Nvidia. What do we know about Alice Huang and Megaspeed? We have to be careful about what we know and what we don’t know. So far, there are allegations that the US intelligence community believes that Alice Huang may be an asset of the Chinese intelligence services. Megaspeed itself is a customer of Nvidia’s and they built a data center in Malaysia. They also seem to potentially have ties with Chinese companies and could — and this is where we’re getting into what we do know and what we don’t know — potentially be a conduit for Chinese AI companies accessing cutting-edge Nvidia chips like Blackwells. Verge subscribers, don’t forget you get exclusive access to ad-free Decoder wherever you get your podcasts. Head here . Not a subscriber? You can sign up here . I want to rewind way back. The notion that the Chinese AI industry wants Nvidia chips has been floating around for years and the idea that the Chinese AI industry would somehow develop a parallel set of technology or a superior set of technology because of the constraint of not having Nvidia chips has percolated into the discourse several times. I’m particularly thinking about DeepSeek. DeepSeek launched R1 and it outperformed our models in some ways. We think they didn’t have access to the chips. There are some accusations that they had access to the chips. It turns out they did a bunch of fine-tuning on the chips they did have. What is that relationship like? Do they need the highest-end Nvidia chips? Is it true that they’re actually developing parallel technologies that might be superior to the chips they can have? Just set that stage. A lot of the details are murky, and they’re probably murky for a reason. But up until now, we saw Chinese AI companies that were very heavily dependent on Nvidia chips in order to train and run their models. In fact, they became some of the biggest contributors to the CUDA ecosystem, which is Nvidia’s software ecosystem and platform. They got very good at that, but at the same time with US export controls and greater technology restrictions on access to cutting-edge GPUs, China increasingly pushed these AI companies to switch away from Nvidia to Huawei and other domestic AI chip makers. The idea there is to develop a parallel domestic AI chip supply chain that is good enough, if not on par with, Nvidia’s latest chips, and — crucially — resilient to policy actions coming out of Washington. So that is the story up until this point. The question is, now, what is that trajectory for the Chinese GPU or AI chip development? The reason I wanted to start there is that the motivations to get close to Jensen Huang are very murky to me. As the CEO of Nvidia, I understand that everyone thinks he’s the character and he’s actually in the software designing the next generation of Nvidia GPUs, but he’s just traveling the world giving policy speeches. If you want to build a parallel GPU ecosystem, you’re trying to get close to the designers and the engineers, right? What would be the goal of trying to get close to Jensen Huang? If you wanted the design specs for the latest Nvidia GPUs, I don’t know if you would ask Jensen directly. I think you might want to go to his technical staff. He does have like 60 direct reports. Decoder is often a show about org charts and that one has been on top of my list for a long time, but we’ll set that aside for now. Keep going. What it’s really about is potentially two things. One is trying to understand, maybe to glean information about, the US policymaking process. Jensen Huang is very close to Trump. They talk a lot. Trump can apparently just call Jensen on his cell phone at any moment . In the middle of a conference. We’ve seen the video. On the other side, and maybe this is even the bigger issue, perhaps it’s the biggest concern of all, is the concern that the direction of movement could run the other way, which is that somehow through Jensen, China might be able to influence US policymaking, especially on export controls. That is the big worry from a lot of people in Washington. One of the other underlying concerns here, that I’m just trying to parse out, is that Alice Huang, the alleged Chinese spy, is an executive at a company called Megaspeed. And through Megaspeed, Nvidia may have already been circumventing export controls. It seems like if you’re already solving the problem, maybe you should just leave it alone. How does that dynamic play out? A lot of the story is strange. Even seen in the most cynical terms, it doesn’t quite add up. There could be several different possibilities. One is that this is actually not some concerted strategy from Beijing to try to obtain chips or information or influence, but this is potentially Beijing not quite understanding the full situation and wanting to co-op this Alice Huang person and at least try to understand from her standpoint what is happening. Because I think you’re right. Already you have a very strong relationship between Nvidia and Megaspeed. You also already have — and this is on the influence side — Jensen Huang advocating for his own commercial interests, for a loosening of export controls on his own chips to China. You don’t really need Beijing to push on that gas pedal. That’s already happening. So there are some things that don’t quite make sense if you’re thinking about it from those standpoints, but if you’re thinking about it from the viewpoint of “Beijing wants visibility,” then perhaps that is another plausible explanation. Beijing just wants someone who Trump calls on the phone to advocate for their viewpoints. I see all of that, but what are we getting out of it? If the goal is Nvidia chips, it feels like that is already assured. If the goal is Nvidia engineering plans, that feels like a question mark. If the goal is influence over the Trump administration, I feel like they could have just bought cryptocurrency. [Laughs] That’s right. There’s a big swirl of what is actually happening here. Maybe your point that Beijing just needed more visibility because it is a swirl is the motivating factor. The question that leads me to is that the New York Times reports that US intelligence agencies first flagged these issues a year ago to the Trump administration. There was a memo from Marco Rubio. The reporting is that he oversaw the memo, which is as much plausible deniability as anything. He oversaw it. He was aware that there was a memo. A year ago, the United States’ national security apparatus was worried about Alice Huang at Megaspeed, her relationship with Jensen, and nothing occurred. What do you make of that? That is one of the most worrying aspects of all this. Regardless of what the details are and what is known publicly versus what our intelligence community knows, this is something that should be investigated. This is obviously a major national security issue and this is something where you don’t want someone meddling with this process. You want to do a full investigation, get to the bottom of what’s happening. I think what we’re seeing from some of the reporting is that this has been known, and in fact, if anything, there may have been efforts to try to stop this investigation or distort it in some way. That is very troubling from that internal, within-the-US-government perspective. There’s a lot going on with Nvidia in that part of the story, where Nvidia’s own spokespeople are saying, “There’s nothing going on here. This is a normal relationship,” on the record to many publications. A week later, Jensen issues his apology letter saying there was a relationship. That’s not great for John Rizzo, Nvidia’s comms person. Tim Teter, Nvidia’s general counsel, is out there saying everything is above board. Now we know not everything is above board. What do you make of Nvidia’s corporate governance here? Because there’s a whole bunch of shareholder lawsuits to come. There’s one filed as of today . I can only imagine there are more to come. Nvidia has to tread very carefully here because what you don’t want is exactly what’s already happening, which is to start to deny or dismiss some of these issues and then turn around and have to say, “Actually, there might be something there.” This is especially important now as there are growing calls for a congressional investigation. So this is going to be separate, perhaps, from within the executive branch where, again, I think we have reasons to worry about conflicts of interest and people not wanting to do this all the way. But if there’s a full-blown congressional investigation, that might reveal some things that, if you are Nvidia, you want to get out in front of rather than have to backpedal later on and explain yourself. Part of the back and forth here with the government’s concern about Alice Huang and Megaspeed is that the Commerce Department spent months looking at the company and then Teter, the general counsel of Nvidia, emailed them and invoked a direct relationship with the Commerce undersecretary, Jeff Kessler. That got the case kicked to the DOJ where everything stopped. Trump yesterday said the FBI is investigating — that’s obviously connected to the DOJ. There’s a universe where the Trump administration is trying to make this go away. Nvidia can pressure the Trump administration to make this go away. That reeks of corruption, obviously. And then you have a very empowered class of Democrats coming into Congress with polling that suggested corruption was one of the top issues in this last election. I don’t see any outcome except those Democrats and an empowered bunch of investigators and an empowered bunch of committee chairs coming after Nvidia as hard as they can. How should the company think about that? Should they just fire Jensen now to get away from it? Should they put them in front of Congress every day for the next year? How do you think that’s going to play out? I think, at the most fundamental level, they need to cooperate and comply with calls from Congress to carry out this full investigation. Because up until now, this has all been so murky, and part of the reason why this has been a stop-and-go, even though those of us in the China AI space have been hearing about this for a while. Companies like Megaspeed, their role in all this, even people like Alice Huang, have been flagged much earlier than this. The fact that this is coming out now, but also that the investigation was stopped and started within the Trump administration, is a big red flag. Ultimately, from Nvidia’s standpoint, they’re going to have to come clean with whatever Congress now requests. There are going to be a lot of hard questions from Congress, as there should be, that have been building up for some time now. If you ever looked at Jensen’s approach to chip export controls, he’s been very fiery that chip export controls are stupid . You mentioned earlier that’s in his business interest. It is better for the Chinese AI industry to be dependent on CUDA and dependent on Nvidia chips, because then if we do get into some conflict, maybe you can restrict that access and you’ll set them back. There’s some swirl of argument that he makes that says it’s in the United States’ national security interest to ship as many Nvidia GPUs to China as you can. Then there are a lot of China hawks who are saying, “Actually, you need to restrain them and keep them years behind. They will not catch up to our bleeding-edge technology. Jensen, you just keep us ahead.” It feels like, out of all of this, the China hawks are going to start winning more fights than they’re losing — arguing that the Chinese government is actively trying to impede our efforts or actively trying to influence our government. How should people think about that? What framework should we use to evaluate that mass of differing opinions, especially now that there’s a catalyst for some kind of change? I think that’s the right way to frame up this whole debate. You have, on the one hand, folks who see the US-China AI competition as a critical strategic competition and access to compute is one of the key levers there, and thus US export controls, not only as they stand now, but tightening them further will be critical to maintaining US edge in the most powerful technology of our lives. Then there are other people who are in the opposite camp who advocate for greater exports of the US AI tech stack writ large, including Nvidia chips and including to China. Up until now, that camp has been led by people like [Commerce Secretary] Howard Lutnick, Jensen Huang, and Trump himself. What’s interesting is the balance of power, in terms of whose arguing gets more weight, has been shifting and will shift in light of this recent controversy. So here now those who have been advocating for more exports and fewer export controls, some of their arguments have been tainted by this process potentially, regardless of where the investigation goes. Then there’s a final variable in all this, which is China itself. That’s something that matters a lot in this discussion because in the background, China is doing two things. One, they’re trying to build their own chips and they’re sort of all-in on building a resilient semiconductor supply chain with their own, say, Huawei AI chips that their own AI companies can use. They will never really catch up. It looks highly unlikely, but they could develop good enough chips to replace the Nvidia ones that they have been dependent on for so long. The second big factor from China is retaliation. And this is one thing that I’m watching very closely. If these greater export controls are placed by the US on not just chips to China, but also on chip-making equipment — the tools required to make the semiconductors themselves — will China use its own export controls, such as restricting rare earth metals, to hit back? Right. This is in the context of an ongoing trade and tariff war that has rocked the United States’ economy. In many ways, the first thing that Democrats should do when they enter the next Congress is pass a law getting rid of all the Trump tariffs, right? They’re brought into Congress to fix affordability and the tariffs are an affordability problem, and now we’re going to rush into a trade war with China because we might ask the Dutch government to restrict ASML chip making machines. That seems very fraught to say, “We need to enter into an even more heated AI war with China that might result in the Chinese government placing export controls on the goods that you already find unaffordable.” Do you think that there’s the political will to go through this whole exercise, or is it just to punish Nvidia and Jensen Huang? In some ways, this is happening against the backdrop of other issues that are probably more top of mind for both voters and for incoming legislators in the Capitol. Things like cost of living, as you point out, tariffs, and trying to investigate the Trump administration more broadly for corruption and other issues. Somewhere in there is also the debate around data centers and AI itself. So in some ways, I’ll be curious to see how far this goes, the particular Nvidia issue. There is a scenario where a congressional investigation comes and goes, potentially finds no wrongdoing on Jensen Huang’s part, and then this is just folded into the longer debate around export controls. But there’s another world where if there are issues that come up, that could be potentially disruptive, not just for Nvidia and not just for the US-China relationship, but also for the AI boom in the US overall. Tell me more about China itself. You mentioned that their chips will maybe get good enough. There’s an argument that the models right now, the frontier models we have today, are actually good enough to disrupt the economy. They’re certainly good enough to disrupt the field of mathematics. You could stop training new models and just let the technology diffuse and you would still disrupt huge swaths of the economy today. We’re nowhere close to that actually happening. I think the AI labs should prove that they can do it with the technology they have today. That’s for another time. But China doesn’t need to compete at the frontier to gain the productivity advantages and to gain the industrial advantages. The example I keep using is 5G. I was told for a decade that we had to win the race to 5G, otherwise China would do something and no one would ever tell me what the “something” was…