China suspected of smuggling NVIDIA chips worth around 10 trillion won ... Could U.S.-China ties freeze?

[Financial News] The claim that China used a spy to smuggle large quantities of AI accelerators made by U.S. company NVIDIA has cast a shadow over relations between the two countries. Some experts, pointing to the incident and the Democrats’ control of Congress, predicted that ties could worsen.
On the 10th (local time), U.S. technology outlet The Information, citing two people familiar with the matter and public company records, alleged that 42-year-old Chinese businesswoman Alice Huang (Chinese name: Huang Le), reported to be the romantic partner of NVIDIA CEO Jensen Huang, smuggled into China NVIDIA AI accelerators whose export the U.S. government had restricted. The amount smuggled is estimated at at least $7.5 billion (about 10 trillion won). Alice Huang is estimated to have smuggled or supplied to China through leasing arrangements a total of 240,000 of NVIDIA’s high-performance AI accelerators, including the H100, H200 and A100. Computing capacity from the products was provided to Alibaba Group and Tencent Holdings Limited, as well as smaller AI companies in China, and used to train AI models and for other purposes.
The Information said that Megaspeed International, a Singapore-based company in which Alice Huang was the largest shareholder, served as a channel for the smuggling. The company was a subsidiary established in Singapore in 2015 by Chinese gaming company Seven Road, but Alice Huang acquired it in 2023. She renamed it Megaspeed International and turned it into an AI cloud provider. Alice Huang and her family used Megaspeed International’s Malaysian subsidiary, Speedmatrix, and Shanghai Century Litong, a Chinese company established in June 2023, to bring NVIDIA accelerators whose export to China was prohibited into the country.
Century Litong, whose founding shareholders included Alice Huang’s younger sister, Huang Wei, secured “preferred cloud partner” status with NVIDIA in October 2023, just four months after its establishment, and received priority supplies of AI accelerators. But when orders for NVIDIA products were halted or delayed due to U.S. export controls on China, Alice Huang stepped in and used her connections at NVIDIA and elsewhere to secure supply. The U.S. Department of Commerce monitored the distribution of Alice Huang’s AI accelerators starting in 2024. The department found unopened NVIDIA equipment piled up at Megaspeed International’s data centers, while Taiwanese authorities monitored Alice Huang’s visits at the U.S. government’s request. Singaporean authorities also investigated Megaspeed International and summoned Alice Huang on suspicion of offenses including making false import declarations, but closed the investigation due to insufficient evidence. Alice Huang later left for Shanghai and was reportedly in China until early this year, but her whereabouts are now unknown.

Alice Huang, whom the United States has identified as an official of China’s Ministry of State Security (MSS), is said to have met Jensen Huang over the past three years at locations around the world, including Shanghai, Taiwan, NVIDIA’s headquarters in Silicon Valley and a golf resort south of San Jose, California. At a technology event in Taiwan in June 2024, she also flaunted her closeness to him, saying she could call Jensen Huang. In a report on the 10th, The New York Times (NYT) alleged that U.S. President Donald Trump was briefed on the affair between Alice Huang and Jensen Huang aboard a private jet bound for China last May, but took no significant action.
Trump’s inaction is expected to undermine his efforts to improve relations with China. In 2023, the administration of U.S. President Joe Biden blocked American companies, including NVIDIA, from exporting high-performance semiconductors such as the H200 to China. Trump, however, has allowed H200 exports following individual reviews since January. Yet as of February, China had officially imported zero H200s. Western media outlets consequently raised suspicions that China was smuggling H200s.
Zhu Feng, dean of Nanjing University’s School of International Relations, predicted in an interview with the Hong Kong-based English-language South China Morning Post (SCMP) on the 10th that the incident would deepen the decoupling of U.S. and Chinese AI. “It is important that committees in both the U.S. House and Senate will conduct investigations,” he said, adding, “This incident will become a second spy balloon episode in U.S.-China relations.” Relations between the two countries were strained for several months after a Chinese spy balloon crossed U.S. airspace over the mainland in February 2023, was shot down and fell into the sea. Leading Democrats called for a hearing with Jensen Huang and tighter AI regulations related to China shortly after the incident.
Forbes, a U.S. business publication, reported that as of the 9th Jensen Huang’s net worth stood at $146.8 billion (about 197 trillion won), placing him 12th on the global billionaire rankings. His ranking fell four places after the scandal, dropping him out of the top 10. Jensen Huang, who acknowledged the affair on the 8th, went to NVIDIA’s headquarters in California on the 10th and chaired a closed-door meeting. According to the NYT on the 10th, NVIDIA appointed second-generation Korean American lawyer Jun Kim (55; Korean name: Kim Jun-hyeon) to lead an independent investigation into the incident. A former prosecutor with the U.S. Attorney’s Office for the Southern District of New York, he is a partner at the law firm Wachtell, Lipton, Rosen & Katz (WLRK).

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