...
By John Feng
China Editor
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
The U.S. Defense Department is planning to create a special task force to steal state secrets from China. No wonder America’s leaders are desperate—the Chinese are far ahead of the economic spy game.
For proof, look no further than Jensen Huang, the billionaire chief executive of Nvidia, the world’s biggest company, valued this week at $4.5 trillion.
On Sunday, Mr. Huang apologized to his family and colleagues over an extramarital affair with a woman who U.S. officials believed to be a Chinese spy. The Nvidia board said the company’s founder would cooperate with an independent review after reports said he was "the target of a foreign intelligence effort."
Read More on Analysis
The leading chip design firm from California said it had "no reason to believe" that national security or Nvidia secrets were exposed.
But economic theft wasn’t the point: China wanted to influence Mr. Huang covertly, and perhaps compromise him overtly, through conflicts of interest. And if its operation ever came to light, the fallout in Washington would be good for Beijing too.
"The so-called Chinese spy allegation is unsubstantiated. It is nothing but smears against China," Guo Jiakun, a spokesperson for the Chinese Foreign Ministry, said on Monday.
China would say that—it’s been going great.
Beijing has never had a reason to play by America’s rules. From forced technology transfer at home to espionage on U.S. soil, there’s little China won’t do to gain an economic or political edge.
Reporting by The New York Times and the Financial Times referred to a relationship between Mr. Huang and a Chinese citizen known as Alice Huang, a former executive of Megaspeed, a data center builder that became Nvidia’s biggest customer in Southeast Asia. Market researchers earlier this year had identified the Singapore-based firm as a suspected Chinese shell company that was diverting AI chips to China.
Megaspeed did not immediately respond to a written request for comment. Ms. Huang, who was questioned by Singapore police last year, Bloomberg previously reported, couldn’t be reached for comment. Her whereabouts are unknown.
The two Huangs aren’t related, but they were unusually close, according to accounts of their interactions and photographs of the pair taken in Taipei, capital of Taiwan, where Mr. Huang, a naturalized U.S. citizen, was born and where the world’s top semiconductors are made.
The U.S. intelligence community assessed that Ms. Huang was likely recruited by China’s Ministry of State Security, or MSS, to target Mr. Huang and collect intelligence on America’s AI chips and influence its export policy.
"The issue at hand is not whether sensitive information about Nvidia or its products might have been compromised by Chinese intelligence services (though that is obviously a concern)," said Ryan Fedasiuk, a former State Department official now with the Foundation for American Innovation, a tech-focused think tank in Washington, D.C., in a post on X.
"The issue at hand is whether Mr. Huang's confidential personal relationship with his customer might have weighed materially on any decision to export Nvidia's products to Megaspeed—or to defend the company's broader client relationship with Megaspeed—even after it was revealed the Commerce Department was investigating that company for surreptitiously diverting Nvidia's products for resale to China, in contravention of U.S. law."
Senior U.S. officials in the administration were made aware of the U.S. intelligence concerns before President Donald Trump traveled to Beijing in May for the first of two summits with counterpart Xi Jinping, according to the reports.
Mr. Huang was part of the U.S. business delegation in Beijing and attended the state dinner held in honor of Xi in Washington, D.C., in September.
...
Those who join the dots will remember Mr. Huang as a critic of U.S. export controls on AI hardware to China. He lobbied hard for an export license for Nvidia’s good-but-not-best H200 chips and was given the green light in December.
His eagerness to do business at a time of intense competition between the world’s two largest economies made him popular among Chinese AI labs too—they needed more computing power to catch up to industry leaders in the United States.
It now appears that Beijing was developing Mr. Huang as an unwitting ally, so how did America let this happen?
The early signs were there for all to see. The New York Times reported 13 months ago that the U.S. federal government was scrutinizing Ms. Huang’s Megaspeed and its billions of dollars in orders of Nvidia chips.
Then on May 13, the day Trump landed in Beijing, the New York hedge fund Culper Research said it had uncovered documents that showed Megaspeed was being "secretly financed" by Alibaba, the e-commerce company that now is one of China’s biggest AI players.
The report linked Nvidia’s chip revenue to a Chinese tech firm that the following month was added to the Pentagon’s Section 1260H list of companies aiding China’s military modernization.
"We share the consensus view that AI—for better or worse—will continue to transform society. This is not a bet against AI. We are short Nvidia for one reason: the Company has a significant China problem," Culper said at the time, meaning that the fund is not holding Nvidia stock and isn't optimistic about the company long-term.
Among America’s blind spots may have been Mr. Huang’s credibility with Trump, who made the Nvidia boss a tech adviser this past March. On Sunday, he called Mr. Huang "a fine person" who should continue to lead Nvidia.
"I think he’s an honorable guy. I think he probably has an excuse for it. He’s done an amazing job for our country," Trump said.
The potential exposure to China of one of the most high-profile American businesspeople in recent history will be of concern to both parties in Congress.
The briefs from within the administration suggest someone in or near the White House isn’t happy, but it’s the Democrats who have been given another reason to come out swinging against Trump’s softer approach to dealings with Beijing.
Chris Coons, a Democrat from Delaware who will be the new chair of the Senate Foreign Relations Committee in January, said on social media: "The more I learn about the insane relationship between the Trump Administration, Chinese spies, and AI billionaires, the more I’m convinced there is nothing this administration does that isn’t corrupt. Congress will investigate and get answers."
Elizabeth Warren, a Massachusetts Democrat, told CBS’s Face the Nation that there was "substantial bipartisan support" on the Senate Banking Committee, which she will chair, for chip restrictions.
"I'm on bipartisan bills in order to put more restraints on the ability to export our chips to China. In fact, we have worked on a bipartisan basis to try to stop Donald Trump from encouraging Nvidia, permitting Nvidia, to send these chips to China. And now we’re seeing some of the consequences of that."
Many underestimate China’s state intelligence apparatus and forget that its operations against political elites are "highly professional and targeted," said Peter Mattis, president of the Jamestown Foundation think tank in Washington, D.C., on X.
Mattis said: "For the MSS, trying to get close to Jensen Huang would not be about trade secrets. This would be a political case: both from access to political insights in DC and for political influence.
"The first is bad enough, because of the circles he ran in. The second though is what we often forget about the MSS: they want to influence as much as collect intelligence.
"Nvidia sits at the crux of a core technology that Beijing has determined has near existential consequences for their view of global rivalry and underpins comprehensive national power going forward. How do they not try to influence, given how the MSS views their mission?
"If the MSS tried to get close to Huang, then there are many others who should be thinking about counterintelligence risks that probably have not been."
View 0 Comments
Submit Correction
View Editorial & AI Guidelines