A two-year-old affair rumor about Jensen Huang, why did it explode now···Concerns that the board's dismissal review could ripple through the AI industry and U.S.-China relations - 경향신문

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A photo captured Jensen Huang, Nvidia CEO, together with Alice Huang, the woman named as his alleged affair partner, at a Nvidia event held at a restaurant in Taipei on May 22 last year. Taiwan's CTI broadcast capture·Reuters/Yonhap

Three days after Nvidia CEO Jensen Huang admitted to an affair, the board has moved to prepare for his dismissal. The situation has become uncontainable as allegations of ties to a Chinese spy spread uncontrollably and an additional affair rumor involving a company executive emerged.

Questions are mounting over why Huang's affair rumor, which had circulated for two years, has erupted into a massive scandal now, and why the Donald Trump administration did not take follow-up action even after receiving intelligence warning of possible ties to a Chinese spy. Anxiety is rising that, if Huang's dismissal materializes, the shock could spread beyond Nvidia to the global AI industry and the broader U.S.-China relationship.

It appears the industry began to learn in 2024 about the close relationship between Alice Huang, who is embroiled in Chinese spy allegations, and CEO Huang. At a drinking gathering with industry figures at the time, Alice Huang said, “I can call out Jensen Huang,” then made a call, and CEO Huang reportedly showed up there not long after.

The New York Times (NYT) published a story in October last year, one year ago, highlighting their relationship and raising the possibility that Alice Huang was involved in supplying China with billions of dollars worth of Nvidia's advanced chips by circumventing U.S. export controls. Christian Lamarco, founder of short-selling firm Culper Research, also released a report in May stating that the relationship between CEO Huang and Alice Huang was “uncomfortably close.”

However, the impact at the time was limited. About three weeks after the NYT report, the United States and China agreed to a trade truce on the occasion of the Busan summit, and even after Lamarco's report was released, Nvidia's share price hit a record high.

What changed was the NYT report on the 29th of last month, five days before the midterms, that U.S. intelligence agencies had assessed Alice Huang as an informant for a Chinese intelligence service, and that President Trump took no particular action even after being briefed on the intelligence. A CEO's private relationship and alleged circumvention of chip export controls thus expanded into issues of U.S. national security and presidential decision-making.

There are various interpretations of why the long-known relationship between the two has exploded into a mega-scandal ahead of the U.S.-China summit on the sidelines of the Asia-Pacific Economic Cooperation (APEC) leaders meeting. In particular, analysts say that President Trump's political standing has been shaken by a crushing midterm defeat, unleashing pent-up frustration among hard-liners on China.

AFP noted that hard-liners on China, sidelined as President Trump prioritized a trade truce with Beijing, are seizing on this case. CEO Huang has lobbied actively against export controls on AI chips, and President Trump accepted his request and allowed exports of H200 chips to China despite opposition from China hard-liners.

Alok Mehta, a researcher at the Center for Strategic and International Studies (CSIS), said, “China hard-liners, who were quite dissatisfied with that decision at the time, wanted to push export controls on China much more aggressively,” adding, “Now their efforts have borne fruit.”

Another factor is that voices of China hard-liners within the party have grown as President Trump's political influence has waned. Kyle Chan, a researcher at the Brookings Institution, analyzed that Republican lawmakers had long feared clashing with President Trump but, after the crushing midterm defeat, may feel less burdened about voicing opposition to him.

Why did Trump look the other way despite knowing?

Nvidia CEO Jensen Huang shakes hands with President Donald Trump. Reuters/Yonhap

As the situation snowballed, a belated dispute erupted within the Trump administration over responsibility for overseeing Nvidia.

According to the U.S. online outlet Axios, on the 5th, as the Huang scandal was spreading, President Trump met in the White House Situation Room with Secretary of State Marco Rubio, Treasury Secretary Scott Besant, and Commerce Secretary Howard Rutnick, among others. At the meeting, Secretary Besant reportedly pressed Secretary Rutnick on why he had refused export-control measures against Megaspeed, where Alice Huang serves as an executive. In fact, based on the Federal Register, Secretary Rutnick had not added a single company to the export-control entity list for more than a year.

The Washington Post (WP) pointed to President Trump's contradictory China policy as the root cause: competing with China for technological and military primacy while seeking to improve ties with Chinese President Xi Jinping. Even while labeling China's acquisition of advanced technology a national security threat, he showed a passive stance on taking action over CEO Huang's alleged misconduct in order to preserve the trade truce, it said. Victor Shih, a professor at the University of California, San Diego, told WP, “Under a different president this scandal would have provoked a major backlash, but Trump likely did not want to jeopardize the achievements of the last two U.S.-China summits because of this issue.”

The Trump administration also likely did not want to risk shaking Nvidia at a time when the U.S. economy is being propped up by the artificial intelligence (AI) industry. Nvidia is the world's largest supplier of high-performance chips used in AI and data centers. By some estimates, Nvidia's share in the relevant market exceeds 80%. Other companies such as Google and AMD have tried to develop chips that can compete with Nvidia, but none has yet broken the company's overwhelming dominance.

The problem is that even within Nvidia, too much power is concentrated in the hands of CEO Huang alone. From product development to management strategy and relationships with major clients, he effectively leads the key decisions. More than 60 executives reportedly report directly to him, and there is no clear successor to lead the company. In other words, the fate of a company that dominates the global AI chip market is excessively dependent on a single founder.

Ultimately, if CEO Huang falters, Nvidia's management stability could be threatened, and the fallout could spread across the AI industry, a key growth engine of the U.S. economy. For the Trump administration, which is competing with China for AI supremacy, this is a scenario to avoid at all costs.

Yet the affair rumor and spy-tie allegations around CEO Huang erupted at the worst possible moment. With Democrats, who are skeptical of AI data centers, taking control of both chambers and forecasts emerging of a slowdown in the AI market, the rising possibility of Huang's dismissal sent Nvidia shares plunging 8.6% in after-hours trading that day.

Major Silicon Valley investors argued that removing CEO Huang could damage U.S. competitiveness in the AI industry. Musk responded “Agree” to a post by venture investor Shaun Maguire opposing his dismissal that said, “Jensen Huang is indispensable to America's AI leadership.” Billionaire investor Bill Ackman also voiced support for CEO Huang, saying, “Even great people can make mistakes.”

But some say this is an opportunity to correct Silicon Valley's corporate governance. D. Wardrick McNeil, executive managing director at consulting firm Longview Global, wrote in a piece for CNBC that “In Silicon Valley, which lionizes visionary, genius founders, boards have too often tolerated their monopolization of power,” adding, “When a small number of executives control America's core technology and information, their personal vulnerabilities can become national security vulnerabilities.”

On Capitol Hill, efforts to tighten export controls on semiconductors to China are gaining new momentum. The Wall Street Journal (WSJ) reported that key lawmakers from both parties are pushing to include three bills that strengthen chip export controls ‘AI Overwatch Act’, ‘Semiconductor Security Act’, and ‘MATCH Act’ in the National Defense Authorization Act (NDAA) and pass them.

The measures would give Congress veto power over approvals for AI chip exports to adversaries such as China, and would mandate the introduction of chip location-tracking devices to prevent U.S.-made advanced chips from being smuggled into China via third countries.

A congressional probe of Nvidia is also moving into full swing. Three Republican lawmakers including the chairs of the House Foreign Affairs and Intelligence Committees and the chair of the Select Committee on China have demanded that CEO Huang appear in person for a closed-door briefing on the 18th, and are considering issuing a subpoena if he does not comply. Democratic Senator Chris Coons, who is mentioned as the next chair of the Senate Foreign Relations Committee, also signaled that in the new Congress next year he will investigate the relationships among the Trump administration, Nvidia, and Chinese intelligence agencies.