The news that Nvidia’s CEO Jensen Huang engaged in an affair with a former executive of a Singaporean firm has sparked worries regarding China’s potential to obtain advanced microchips that are currently restricted from the nation.
Huang has acknowledged his relationship with Alice Huang, a Chinese business executive who became the controlling shareholder of Megaspeed International, a cloud-computing company based in Singapore.
According to a report from The New York Times last month, U.S. officials have determined that she is a Chinese intelligence operative who relayed information to Beijing while forming a close relationship with the Nvidia CEO—claims that the Chinese Foreign Ministry has labeled as “baseless.”
Megaspeed has faced scrutiny from U.S. authorities amid suspicions of its involvement in assisting Chinese entities in acquiring advanced Nvidia chips, which are subject to export controls from Washington.
In light of the scandal, the effectiveness of U.S. restrictions on exporting these high-tech chips to China is under examination.
This situation raises questions about why China seeks these high-performance chips, the rationale behind the U.S. export ban, and the ways in which China continues to secure them.
What drives China’s demand for Nvidia’s chips?
Nvidia is recognized for creating the most powerful AI chips globally, which analysts consider the benchmark in the industry.
“Their chips are at the leading edge of the AI revolution,” stated Ryan Ellis, an associate professor at Northeastern University in Boston, specializing in communication law and policy, infrastructure politics, and cybersecurity.
According to Dennis Wilder, a former senior U.S. intelligence officer and National Security Council director for China, artificial intelligence requires substantial graphics processing (GPU) power.
High-end chips, such as those developed by Nvidia, offer a cost-effective solution for AI development without necessitating the construction of additional data centers to increase GPU capacity, Wilder noted.
Ellis added that these chips enable the most sophisticated AI models, indicating that restricted access to them hinders progress.
“Within China, there is a tremendous demand for these chips,” he commented. “There is a vibrant black market for the most advanced video chips in China.”
Why has the U.S. prohibited the sale of these chips to China?
In October 2022, during the Biden administration, the U.S. Department of Commerce established export controls on advanced computing chips destined for China. This action means that Nvidia’s top-tier chips, including Blackwell Ultra and Vera Rubin—both GPUs utilized for AI models—are barred from sale to the country.
The U.S. government cites two main reasons for these restrictions: to maintain its global supremacy in AI development and to safeguard national security.
According to Chris Mattmann, who was the first chief data and AI officer at UCLA, whoever excels in the AI race and trains the best models will have a dominant position in the forthcoming era of AI innovation.
Nvidia shares fell sharply after the U.S. tech giant commenced an investigation into CEO Jensen Huang’s affair with a woman alleged to be a spy for Beijing.
While the U.S. maintains a lead over China, that gap is narrowing, according to Mattmann. He noted that any factor that could “shift the balance,” such as access to advanced chips, helps to close that divide.
Additionally, the U.S. aims to uphold national security, concerned that granting China access to these chips could enhance its military capabilities, potentially leading to technologies that may threaten U.S. interests.
“Export controls are always attempting to foster market growth while also shaping that market to prevent compromising national security,” Ellis remarked.
However, U.S. President Donald Trump has relaxed some restrictions, now permitting the sale of other Nvidia chips that were previously blocked—typically those used in consumer electronics—to China under specific conditions.
How is China obtaining Nvidia chips?
Shortly after the imposition of advanced chip restrictions towards China, many vendors established an illicit smuggling and underground network to funnel the chips into China for sale to local companies, according to a report by Germany’s Deutsche Welle (DW) news agency reported.
The U.S. has targeted those vendors wherever feasible. In December 2025, the Department of Justice announced the arrest of two Chinese individuals for allegedly smuggling Nvidia chips to China.
A screengrab from CTI video footage shows a woman identified by Reuters as Alice Huang, after comparison with a photograph obtained separately, attending a dinner with Nvidia CEO Jensen Huang at a restaurant in Taipei, Taiwan, on May 22, 2025. (Reuters)
However, there exists a legal loophole that can be exploited to transfer chips to China.
Although Nvidia is prohibited from directly selling its most advanced chips to China or Chinese-based companies, it can sell them to other nations, and third-party data centers can subsequently lease access to those centers to companies linked to China.
Nvidia is opening an investigation into its CEO, Jensen Huang, after he admitted to having an affair. The woman in question is accused of being a Chinese spy, having allegedly passed information to Beijing, according to a media report. New York Times reporter Julian E. Barnes, who broke the news of Huang’s relationship, says ‘there is a long way to go on this story.’
For instance, Nvidia could sell its chips to a Malaysian firm, which could then lease that computing power to a Chinese enterprise, Ellis explained, and “that would be compliant with regulations.”
While some U.S. lawmakers argue that this loophole should be closed, others view it as a reasonable solution, according to Ellis.
However, he indicated that the ongoing scandal suggests that these chips are frequently sold to other nations, where they are then transported straight to China.
Are the restrictions genuinely effective?
Ellis stated that U.S. export controls “will never be completely foolproof.”
Nevertheless, he believes that there could be more random inspections and more vigorous oversight to ensure that the chip purchasers are indeed the final users. “The enforcement is lacking,” he asserted.
Wilder concurred that the enforcement division of the U.S. Commerce Department, the Bureau of Industry and Security, is not adequately staffed to uphold the restrictions.
For example, Reuters reported that China’s Northwestern Polytechnical University acquired Nvidia H200 chips last month, according to official records. The agency also discovered that several other Chinese universities had purchased Nvidia chips that are prohibited from export, including institutions closely connected to China’s defense sector or military research.
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These controls have also sparked inquiries regarding their effectiveness in slowing China’s technological advancements.
Since the U.S. banned Huawei and subsequently China from acquiring some of the most advanced computer chips and manufacturing equipment in 2019, Chinese semiconductor manufacturers have rapidly pursued self-sufficiency, striving to develop their own chips and expertise.
Jensen Huang himself has supported the relaxation of export controls on China, arguing that continued U.S. sales to China would sustain American technological leadership and keep Chinese clients dependent on U.S. innovations.
“We must, first and foremost, ensure our national security and protect our nation, but we should also compete, advance our technology sector, and maximize our exports,” the Nvidia CEO stated to The Associated Press in June.