Nvidia, a company that originally made chips for video gaming, has become the driving force for AI processing and acts as a quasi-banker, providing capital and support to companies using its products. The firm faces intense scrutiny over alleged significant exposure to Chinese customers, despite Trump administration restrictions from last April banning hi-tech product sales to the region. An activist report by Culper alleged Megaspeed, a major Asian customer spending $US4.8 billion over two years and spun off from Chinese gaming company 7Road, is financed by Chinese e-commerce giant Alibaba via shell companies. This raises concerns about Nvidia’s reliance on China sales, even as local competitors gain traction.
Preventing Beijing from acquiring Nvidia’s most sophisticated chips remains a US government priority, aiming to hinder China’s advanced AI development. While Nvidia sells less sophisticated H200 chips to Chinese buyers with US approval, the controversy intensified a crisis of confidence in the AI trade. This sentiment contributed to a $US2.3 trillion wipeout in the Nasdaq last Thursday (Friday AEDT), with the index now $US5.7 trillion below its October peak amid worries about stretched valuations and mounting debt.
Local Nvidia investors, grappling with a 20 per cent stock plunge over the past month, express frustration. Alex Pollack, CIO of Loftus Peak, a major Nvidia investor, highlighted key person risk given no succession plan and a ‘whiff of espionage’. Despite public backing for CEO Jensen Huang from Donald Trump and Bill Ackman following personal revelations, the incident adds considerable uncertainty. Nvidia’s internal inquiry and the wider examination of its China relationships and export-control exposure come just days before its quarterly earnings report on November 18.
