Jensen Huang’s Downfall Is So Much More Than a Sex Scandal

0:06Today, Jensen Huang.

0:08Derek Thompson: This is an emergency podcast of sorts. If you're watching, you can see behind me, not our normal studio setup, but rather the window curtains of a lovely hotel because the Jensen Huang news just escalated and escalated and escalated while I was traveling for work. So we are recording this early, early, early on Friday morning to incorporate the latest breaking news in this story where news doesn't stop breaking. The last few days have moved very quickly. First came rumors of a special relationship between NVIDIA CEO Jensen Wang and the executive of a Singapore data company, Megaspeed. Singapore data company, by the way, that is widely suspected of smuggling restricted chips into China.

0:49Derek Thompson: And then, oh, that executive might be a Chinese spy. and then, oh, confirmation this was a full-blown romantic affair, and then confirmation of another affair with a direct report, and then confirmation of another affair with a direct report. And as the accusations mounted, the board of NVIDIA met to determine the future of the company, and Jensen Wong resigned. As I wrote yesterday in my newsletter, it's hard to imagine a single individual more central to the artificial intelligence age. Huang is the founder and chief executive of the world's largest AI firm, a$4.5 trillion company. At least last I checked, that number is dropping significantly by the hour.

1:31Derek Thompson: NVIDIA's sales account for more than 80 % of the global sales of special chips that power advanced artificial intelligence. But even that packed description of what NVIDIA does and what share of global chips it accounts for falls very short of capturing what Wong means to the AI world. With that trademark black leather jacket and his cult devotion, Jensen was known as the Taylor Swift of AI, according to The Economist. In Taiwan, adoration of him is known as Jensenity. And his rockstar status wasn't some cosmetic quirk. It was financially crucial to the company's growth. Analysts say NVIDIA benefited from personal relationships with Taiwanese manufacturers who were eager to work with him, hoping his stardust would rub off on them.

2:17Derek Thompson: Many of NVIDIA's counterparties weren't just buying NVIDIA chips or its CUDA ecosystem. They were buying into a cult of personality. Jensen, in so many ways, is irreplaceable at NVIDIA, and that irreplaceability is engineered by design. Jensen claims roughly 60 direct reports, 60, which is five to 10 more than the industry average. He once said he doesn't believe in succession planning because he wanted to run NVIDIA for another 60 years until he was in his 120s. So it's not shocking that the company lost nearly$1 trillion in value in the last week as it became clear that the Formula One car built for one driver was ejecting that driver into the exosphere.

3:02Derek Thompson: There's so many reasons to care about the story beyond the salaciousness of the affair or from a mere position of self-interest, the fact that NVIDIA is the first or second largest company in the world,$4.5 trillion, has been responsible for much of the increase in the S &P 500 since 2022. So if you are a normal vanilla stock investor, owning like the most boring index that just sort of approximates the S &P 500 growth, you are invested directly in NVIDIA. And your net worth has absolutely declined by several hundred to tens of thousands of dollars in the last few hours. But beyond the newspeg of your and my investment portfolios, this is a massive story about corporate espionage, about geopolitical scheming, about AI policy and the Trump administration's commercial entanglements.

3:55And to work through it, we have not one but two guests.

3:59Derek Thompson: Jordan Schneider is the co-founder and editor of the newsletter and podcast China Talk, which is absolutely one of the single best sources in all of news for news related to China. And Ben Buchanan, an AI policy official with the Biden administration, whose new book, The Bitter Struggle, covers the geopolitics of the AI build-out. We talk about Jensen, Alice Wong, Megaspeed, the relationship between the US government and NVIDIA, the debate between the China hawks and those who have been more permissive about selling chips into China. What the biggest story here truly is beyond a sex scandal and so much more.

4:39Derek Thompson: I'm Derek Thompson. This is Plane English.

5:11Derek Thompson: This episode is brought to you by JPMorgan Chase. In today's unpredictable world, geopolitics isn't just a backdrop. It's shaping markets, business strategy, and risk. The JPMorgan Chase Center for Geopolitics brings together former senior policymakers and seasoned practitioners to translate fast-moving global events into clear, decision-ready insights. From conflict and great power competition, To energy and supply chain disruption, the center helps clients anticipate what comes next. Read the latest insights at jpmorganchase.com slash center for geopolitics. This episode is brought to you by JIRA by Atlassian.

5:50Derek Thompson: Your work is scattered. A thread here, a DM there, five different docs related to the same project. And now it's not just your team hunting for context. It's your AI agents too. JIRA taps Atlassian's teamwork graph to bring that context together across Jira, Confluence, Slack, GitHub, and more. It makes it easy to share with the agents you already use, like Claude, Cursor, and GitHub Copilot. Assign them work directly or connect your agents through MCP. The result, less token waste, more accuracy, and more time moving work forward. Learn more at jira.com. That's J-I-R-A dot com. Jordan, welcome to the show.

6:32This is a dream come true. I was a Grant Land kid. I haven't missed a plain English episode in years. I've got tier lists and snake drafts ready for you. But if you just want to talk about AI and chips, we can do that as well.

6:48Derek Thompson: Feel free to work in your tier lists and snake drafts as we go on. Ben Buchanan, welcome to the show. Long-time listener, first-time caller. Thanks for having me. Thank you, guys. So there are so many layers here from the extraordinary role that Jensen's play and the AI build out and the quasi-statesman role that has come to play in geopolitics. We've got the mystery of Alice Wong. Who is she? Is she actually a spy? And then there's the real policy and economic stakes here. Before we tell this story in that order, Jensen, Alice, the bigger picture, Jordan, starting with you, what is the most important part of this story?

7:24Derek Thompson: Like, what is the layer that you think is actually the most significant element here that smart people should be paying closest attention to? AI and AI chips are a core contributor to national economic and military power. And this is something that has kind of, you know, folks like Ben Buchanan on this podcast were early to, but the entire world really has woken up to over the past four or five years. And Jensen Huang and NVIDIA have been acting as if it wasn't. And so what you've seen over the past years is Jensen doing everything he could, both legally and likely as well illegally, to allow semiconductors, which both parties have decided should not go into China to go into China.

8:19So the revelation of this affair and the fact that this woman likely had some sort of ties to the Chinese intelligence state are just another piece of smoke on the raging five-alarm fire of circumstantial evidence that NVIDIA was not doing enough or potentially was complicit in the transitment of chips, which were not allowed to be imported into China, to be imported into China. And why is this a big deal? Because militaries use chips to train models and deploy models to help fight and win wars. And China is a strategic adversary. So it's an enormous scandal. The most important tech CEO of the most important company on the planet has been undermining US national security interests for years by turning a blind eye or maybe doing a little more than turn a blind eye to shipment of advanced chips into China.

9:23Derek Thompson: Ben, with the proviso that I have spoken to the folks at NVIDIA and am prepared to play the role of NVIDIA defense attorney later in this show, I want you to answer the same question. We're going to get to all the salacious stuff in just a second, but what is, to your mind, the most important part of the Jensen-Wong saga? Jordan has it right. This is actually not a story about sex. It's not even a story about spies. It's a story about technology and how central these chips are to national security, how far China is willing to go to get its hands on these chips and get access to these chip makers, assuming the reporting here is true.

10:02And this is something that we entered the White House in 2021 with a very deep conviction about. And it is worth saying the reason that we are at this point is because there was a series of export controls that the Biden administration put in place in 2022, 2023, and 2024, and even the beginning of 2025, to say these chips are so powerful, we cannot sell them to China. And probably most interesting for this case, when China began trying to smuggle these chips into China or set up remote data centers they could access over the internet, that the administration, the Biden administration, clamped down on those third country exports under something called the diffusion rule.

10:41Trump walked a lot of that back, not all of it. Trump walked a lot of it back. But as Jordan said, there's a very strong bipartisan consensus, certainly in the Congress, that the technology here is fundamental to U.S. national security. And I think ultimately that's what this story is about. Jordan, in the open,

10:57Derek Thompson: I talked about what Jensen Wang means to Western news media. The Economist calls him the Taylor Swift of AI. He is a rock star. That black leather jacket is basically synonymous with his role as a chip empresario. As the founder and editor of China Talk, can you tell me what Jensen Wang means to China and to South and Southeastern Asia? I think we should start with Jensen Huang's relationship to Taiwan and the Taiwanese people. I mean, he's the most famous. He was born in Taiwan, right? He's the most famous Taiwanese American in the world. And he was something of a national hero. You know, his chips have helped drive growth in the Taiwanese economy.

11:41Of course, he fabs them at TSMC, the world's largest semiconductor manufacturer based in Taiwan. And for him to, you know, both over these years be, you know, helping undermine Taiwan's national security by selling these chips that ended up in the hands of the PLA, as well as sleeping with a Chinese spy, a country that wants Taiwan not to exist as an independent nation, is a real body blow. I mean, I feel like this is like, you know, my experience of Kanye back when he turned, you know, MAGA and anti-Semitic. It's like this guy was your hero.

12:20Derek Thompson: I like that. Yeah. So The Economist calls Jensen Huang the Taylor Swift of AI. To you, he's more like the late career Kanye of AI. Ben, from your perspective, how would you describe Jensen's relationship to the U.S. government? I mean, where does he sit between normal, powerful CEO and something between chief executive and statesman whose understanding of the AI ecosystem gives him access to significant material information that puts him at the level of a official of state or an intelligence officer? I think there's probably two different relationships here across the two different administrations.

13:00I would say in the Biden administration, we had pretty clear disagreements with Jensen. He was stridently against what we were trying to do on export controls the whole way through. He felt very strongly that NVIDIA should be allowed to sell its advanced technology to China. He made the argument to us privately and also very, I think, aggressively publicly that this was good for the United States to do. And obviously we disagreed, but there were pretty clear lines of communication. I think Jensen was not shy about using them. But I don't know that Jensen had a particularly special relationship relative to other company executives.

13:41It does seem like it's different in the Trump administration. And here, I don't want to pretend to have firsthand knowledge of what happens in the Trump White House, but the reporting indicates at least that Jensen fairly quickly went from not being known by President Trump to being one of the most trusted advisors. And there's certainly some public evidence for this. He was ceded to the president's right at the recent AI summit. There's a public reporting. He gave tens of millions of dollars to the president's ballroom dinner at Mar-a-Lago and so forth. So certainly, at least based on the reporting, he cultivated a very deep relationship with the Trump administration and with the president.

14:16And it seems like that relationship extended, again, based on the reporting here, to the Commerce Department, which is the agency that issues export controls. The New York Times had the story of Commerce Department officials sort of checking with Jensen and his general counsel, Tim Teeter, on a lot of actions, potentially even NVIDIA interfering in the investigation based on the reporting of Megaspeed and Alice Wong. So that is certainly a level of integration and cross-pollination that did not exist with any company in the Biden administration and seems particularly unique to Jensen's relationship with Trump.

14:54Derek Thompson: I want to circle back to the relationship between Jensen Wong, commerce, and Trump, because this is a very, very knotty relationship that I think goes far toward explaining the most significant aspect of the story that you both touched on, which is, should we allow chips to be sold into China? To what extent have we been turning a blind eye to chips being smuggled into China or China remotely accessing chips in southeastern Asia? This is a huge part of the story that I'm putting on ice for now as we talk just a little bit about the sex scandal itself. Jordan, a bit on the timeline here. In 2023, Alice Wong becomes a director at Megaspeed, a Singaporean data center company that spins off from a Chinese corporation.

15:35Derek Thompson: Later that year, in 2024, her husband introduces her to Jensen Wong, with whom she begins to have an affair, reportedly with his knowledge. No comment. Actually, brief aside, have you guys seen Indecent Proposal? Indecent Proposal is a movie in which Woody Harrelson and Demi Moore are hard on cash, and they're offered a million dollars to sleep with Robert Redford, for Demi Moore to sleep with Robert Redford, specifically. And, like, it's interesting, because, like, when you're being cucked in order to make millions of dollars. Like that is the plot of IndyCent Proposal. And that is more or less like the perspective of Alice Wong's husband.

16:12Derek Thompson: So anyway, that's the ringer tie-in aside, I suppose. Never too early for a sequel, Derek, if you want to pitch one related to chips in the chip industry. Yeah, exactly. IndyCent Proposal 2, chip wars. So the affair begins. Megaspeed's NVIDIA business takes off. According to NVIDIA's own accounting in the 2025 10K, Revenue booked through Singapore, where Megaspeed was based, increased by a factor of 10 between 2022 and 2025. While NVIDIA was the biggest company in the world, growing like gangbusters, the share of global revenue being booked through Singapore triples. I mean, Singapore just explodes as a central node of NVIDIA's business at the same time that he is sleeping with Alice Wong.

16:58Derek Thompson: Jordan, that's the basic timeline here. The question for you is, let's first assume that the intelligence reports that we got at the New York Times are correct and she is a spy. Putting yourself in the shoes of Chinese intelligence, what do they want from Jensen Wong if he's already kind of selling chips through Singapore into China in a way that's benefiting the PLA and Chinese AI companies? Derek, so much. I mean, look, this man has been a kingmaker, mafia don for the entire AI build out since demand for chips exploded in early of 2023. He is the person who allocates chips. He is the person who's pushing the technological frontier.

17:48And he's the person who has the ear of the president. Look, Trump has dialogues and trade negotiations with Xi Jinping all the time. Jensen is an important input into that discussion. I mean, we just had reporting from two days ago that before Trump decided to tell Lutnick to put Megaspeed on the entity list, he gave Elon a call to clear it with him. How many other policies has Trump called up asking Jensen, hey, is this a good idea? Should I do this or not? So these executives are an extremely important input into the policymaking and thought process of this administration. So that's just on this sort of like politics and policy side.

18:30Now, you know, China has a lot of companies that are trying to compete and make chips as good or better than NVIDIA's. Do you not think that access to the email and phone records of the most of the CEO of NVIDIA wouldn't be a juicy industrial espionage target? Of course, China are the masters at this. They've been doing industrial espionage for decades now. So the idea that this would be an opportunity you would pass up is just frankly unfathomable. And people talking on my timeline about like, you know, what would they want? What would they want with this fire with him? I mean, it is so absurd on its face.

19:08I mean, like, look, if you are a GM in the NBA and you could read every other GM's emails, you don't think that would make it slightly more useful when you're negotiating salaries and negotiating deals? I mean, it is ridiculous. This is like, this is, I mean, this is gold for them.

19:23Derek Thompson: the obvious sports metaphor here it seems to me is that when bill belichick was dinged for uh allegedly spying on other teams some people said why did the patriots have to spy on other teams they go 13 and 3 every year anyway and it's like yes a part of what allows them to go 13 and 3 and maybe one to go 14 and 2 and win the super bowl every year as opposed to every three years is to have inside information on the other teams scouting and play calls and you know defensive and offensive of schemes. And so it's a little bit like you can be winning and also want to spy to win a little bit more. I do think that you referenced that there's this debate going on about whether or not Alice Wong really is a Chinese spy, because the incoming information here is, I think it's fair to say, mixed.

20:11Derek Thompson: And there is a subtle difference between being a Chinese spy who is moved like a a chess piece into a romantic entanglement, and a woman who is already in a romantic entanglement that a Chinese spy agency calls to sit down for a coffee and ask if she's got some secrets that she wants to spill. So the question for you is, based on everything that you've read, one, do you think Alice Wong really is a Chinese spy? And two, how much does the answer to that question matter to you at the end of the day?

20:48the level of incompetence that the MSS would have had to be displaying, if there was a Chinese national... And the MSS is the... Sorry, is the Chinese state security. Yes. That they would have to be displaying. If there was a Chinese national who was, you know, central to Chinese hyperscalers like Alibaba and Tencent's access to chips, and they didn't ask any questions. I mean, it is absurd to think that at least a few conversations have not been had. Now, did they give her spyware? Did they give her a USB key? Who knows? We can't say. But I think the other strong piece of evidence here is Marco Rubio thought this was so serious a year ago and whatever intelligence he had was such a big deal that he put a one pager together and briefed it to the president.

21:45Now, look, this is like, this guy is Trump's butt. This is not fun information to deliver. This isn't something, and by the way, this is like extremely sensitive, right? Like they're only picking up that you can't, the CIA, NSA, they don't look at Americans. Their only reason they're picking this up is because they are, you know, reading the emails of the Chinese security state. So look, you don't do this unless you have something to really stand on. Now, you know, we've seen some articles over the past few days, like just how much of a spy was he? Was she? Who knows? We may never know. But, you know, to your question, Derek, like this isn't the story.

22:25The story is that Jensen, A, is stupid enough to be sleeping with one of his sketchiest clients, who is also happens to be a Chinese national. and the fact that he's been, you know, looking, looking the other, uh, you know, I'm looking the other way or, or even potentially facilitating, uh, the transitment of chips to, uh, mainland China.

22:48Derek Thompson: Ben, the Megaspeed piece is awfully curious here. I mean, here's a company with a relatively small 2023 footprint becoming NVIDIA's one of its largest Asian buyers in a very, very short period that just so happens to coincide with a romantic affair. Megaspeed is in your book, The Bitter Struggle. What is Megaspeed? And how long has this company been on the government radar? We put, my co-author Teddy Collins and I put Megaspeed as an avatar in the book because it exemplified for us so well the issues that we were confronting in 2024, which are not necessarily about Megaspeed in particular at the time, but at least I didn't know the company's name then.

23:29but were about a series of very shady companies in places like Singapore and Malaysia that were getting access to chips that were potentially being trans-chipped on to China or building pretty sketchy data centers that the Chinese could access remotely. And our view was that this was the obvious way in which China, by 2024, was trying to circumvent the export control policies on Chinese companies in 2022 and 2023. And here, the procedural history that's interesting is that Megaspeed began as a Chinese company, at least as the reporting indicates, and then became a Singaporean company. So it just seemed to us, as we were writing this book, the perfect, again, distillation of this kind of risk and the policy that we put in place to guard against this risk.

24:12Again, this notion called diffusion rule to limit the chips going to non-trusted actors around the world. President Trump declined to enforce that policy when he came into office, which made this case, I think much more likely and much more damaging. I thought during discussion of how important and how singular Jensen is, is really important and good. One of the things that is vital to understand here is the supply of chips is basically fixed. Only so many chips can be made at TSMC. And our policy was in a world of essentially a fixed supply of chips, we want those chips to go to American companies or trusted companies.

24:52That's what the whole export control regime was about. Jensen clearly had a different view on he wanted a much broader universe of buyers, including China itself, including companies like Megaspeed. But Jensen was a singular force who could determine where chips would go because NVIDIA was so central to the ecosystem and because Jensen was so central to NVIDIA. And there is some reporting here from Bloomberg and others that Alice Wong was sort of bragging that she could quickly get access to chips and there's a cross-investment with DeepSeek and it all gets very, very messy. But one thing I think we do know is just how fixed the supply of chips are, how big the demand is, and how central Jensen is to making the market happen.

25:34Derek Thompson: Just to finish this domino sequence for me. So Jensen, because NVIDIA chips are oversubscribed, gets to decide who gets the most valuable chips in the world. And it is illegal to sell the very most advanced chips directly into China, but it's not illegal to sell those chips to, say, a Singaporean data center company or Malaysia. Your concern, which I think is very realistic and borne out by a lot of the reporting and evidence, is that China is accessing chips that are sold into Singapore and Malaysia. To close this loop here, can you explain, and Jordan, you can pick up on this too if you want, exactly how Megaspeed is helping China evade U.S.

26:15Derek Thompson: restrictions? Are they allowing the Chinese to smuggle the physical hardware itself? Is it mostly remote access where there's sort of extra legally, illegally allowing Chinese companies that shouldn't have access to those data centers to lease chips in those data centers? What do we think is actually happening here? Yeah, I'll have you straight. Just be clear on what's legal and not legal first, then we'll talk about Megaspeed. Under the Biden administration, the diffusion rule has been to at least strongly limit these kinds of dark sales. So it would have been very challenging. You wouldn't your license would be messy.

26:48It depends on the quantity of chips. The Trump administration declines to enforce the diffusion rule. So they don't officially revoke it. So this is still probably illegal, but they're not enforcing it. It gets very messy. In any case, it is illegal to send chips to someone or any export controlled good that you know will trans-ship it. So if Jensen or someone has knowledge that this is part of a smuggling ring, it's illegal, full stop. What is Megaspeed doing? It does seem like there's some combination based on the reporting of they're enabling the transshipment of chips. There's some reporting from Bloomberg, I think it was, that these chips are ending up in China.

27:23And then I think at least not only Megaspeed was claiming to be a data center company and at least in the data center ecosystem of building data centers outside of China to which China could access chips remotely. So that I think is the real risk here is China getting access to the computing power. It's worth saying just as context here, There's never been a Chinese AI model trained on Chinese chips. All of the frontier Chinese AI models, which are still themselves eight to 10 months behind the American frontier, are all trained on smuggled chips, remotely accessed chips, chips that Trump has allowed to be sold to China.

27:57So we're sort of in the details, I think, of a very important scandal here. But it is the policy choices that led to this scandal that are also the policy choices that let China play the AI game at all. China cannot make chips in any kind of appreciable number. Their chips are not very good. And all of this, the reason it matters so much is this is what's keeping China in the game. And we don't have to allow this to happen.

28:21Derek Thompson: Jordan, I want you to pick up on that if there's something you want to add. And as you talk, I'm going to be putting on my NVIDIA hat and getting ready to play defense attorney for the company to tell you both why you're wrong about China and the danger of exporting chips. But why don't you go ahead and finish the answer there before I start to play NVIDIA? I think Ben did it. Basically, look, there are two things that Megaspeed and all these other companies were doing. They were setting up data centers in Malaysia to help Alibaba, Tencent, ByteDance, DeepSea get chips. And they were also shipping these chips into China because they are marginally more useful for these companies if they can be used on domestic workloads than international workloads.

29:04So we've seen both happen. One, the actual transshipment is the illegal part. The data centers in Malaysia is the sketchy part that Ben and I both think is really dumb, but is not necessarily something that's illegal. And the problem for Jensen and NVIDIA is that he had to, given all the reporting, it is, I have like a 99 % degree confidence that NVIDIA knew what was going on. I mean, they were, I'm pre-butting you, NVIDIA, Derek. They were screaming for years and years. There's no such thing as illegal shipments. There's, you know, Jensen at one point, he said, these things are two tons. How could anyone ever potentially smuggle them?

29:52And it's just not true. There's all, and this isn't even using the intelligence community. There's all this public evidence that has been reported over the years by the information, Bloomberg, Wall Street Journal, New York Times, Reuters, everyone has had their own bite at the apple of this story. The fact that it ships in serious quantities, which are not supposed to get into China, have gotten into China. And, you know, look, the financial, I think an analogy we may want to bring in here is the financial system. So banks, they need to, you know, they, um there's you know anti-money laundering laws there's kyc know your customer laws and banks over the past decade after they got hit with some serious fines over the course of the late 2000s and 2010s started taking this incredibly seriously um if iran or hamas or north korea was trying to move money in the um you know western banking system it got extremely hard for them because the banks were doing their, their, a serious good faith effort after the government whacked them a few times and said, no, you guys got to take this seriously.

30:58I mean, maybe we can bring in like an ethical hoops analogy here. There's a part of the, uh, of the NVIDIA story where they're, you know, pushing and skirting the limits and they're doing the letter of the law, not the spirit of the law. So, um, you know, Ben was part of, uh, writing some rules about what types of chips were allowed to be allowed to export it to China. And NVIDIA, you know, they did it like the rule was 100. They did like 99 and a half level of power. But it wasn't just that. It wasn't just ethical hoops. They were also cheating. They were also doing spy games. They were also, you know, paying off refs and whatnot.

31:37I mean, this was going so far and beyond the spirit of the law. And the fact that they would not be aware that, you know, one research report said up to 20 % of their revenue was coming from Chinese companies who really wanted these chips in China, as well as in Malaysia and Singapore, just like completely boggles the imagination.

31:59Derek Thompson: This episode is brought to you by Eden Red Pay. There's no doubt that AI is transforming the workplace, especially when it comes to accounts payable, helping organizations with automating invoices, fraud detection, and cash flow visibility. So Eden Red Pay surveyed financial professionals to uncover exactly how AI is being used, where they're investing next, and what challenges they're working to solve. Visit EdenRedPay.com forward slash Spotify to explore the exclusive survey insights and see how your organization compares. This episode is brought to you by JPMorgan Chase. In today's unpredictable world, geopolitics isn't just a backdrop.

32:41Derek Thompson: It's shaping markets, business strategy, and risk. The JPMorgan Chase Center for Geopolitics brings together former senior policymakers and seasoned practitioners to translate fast-moving global events into clear, decision-ready insights. From conflict and great power competition to energy and supply chain disruption, the center helps clients anticipate what comes next. Read the latest insights at jpmorganchase.com slash center for geopolitics. This episode is brought to you by JPMorgan Chase. In today's unpredictable world, geopolitics isn't just a backdrop. It's shaping markets, business strategy, and risk.

33:21Derek Thompson: The JPMorgan Chase Center for Geopolitics brings together former senior policymakers and seasoned practitioners to translate fast-moving global events into clear, decision-ready insights. From conflict and great power competition to energy and supply chain disruption, the center helps clients anticipate what comes next. Read the latest insights at jpmorganchase.com slash center for geopolitics. Ben, before I finally, finally, finally play the NVIDIA defense attorney, speaking of NVIDIA defense attorneys, a major part of this scandal is some reporting coming out of the New York Times that the Commerce Department was investigating this whole Megaspeed Mishigas that we're talking about.

34:08Derek Thompson: And they got a call from the General Counsel of NVIDIA, or more specifically, they got an email. They got contacted by the General Counsel of NVIDIA. And somehow, the investigation got slowed down at Commerce and something was transferred to the DOJ. One read of this is, okay, well, an NVIDIA lawyer is inquiring into a federal investigation to one of their major clients. No big whoop. Another read of this situation is NVIDIA's general counsel understanding the potential illegality of that company's dealings with Megaspeed called to interrupt or retard an investigation into that which would have exposed a major scandal for the largest chip maker in the world.

34:50Derek Thompson: Can you tell me a little bit about your read of this New York Times report, which I do think a lot of people consider quite explosive? So this is the kind of question that I think Congress needs to investigate. Because in my experience in the government, any kind of enforcement investigation was unbelievably firewalled, as it should be. And it is worth dwelling on this for one second. The Department of Commerce, especially this part of the Department of Commerce, is a law enforcement agency. They have people with badges and guns that enforce export controls around the world as well they should.

35:21In fact, I wish we had more of those people and gave them more money and built that force out more, given what we're asking them to do. So there were investigations during my time in the government that were very important and were firewalled off from the White House. So we didn't know what was going on because it was this is law enforcement and you don't want the White House messing around with law enforcement investigations. Presumably, you also don't want to target the investigation messing around with it. So I obviously don't know what Tim Teer, the general counsel, said or did with the Commerce Department, but this is absolutely a thread that investigators looking at this case should pull.

35:58And it does not fit with my experience of even when I was in the government with all the security clearances and all that, recognizing that there was an appropriate firewall from us in the White House about the investigative and enforcement arm of the Department of Commerce.

36:14Derek Thompson: Jordan, briefly to you, how do you feel about NVIDIA placing a friendly call to commerce as they're investigating NVIDIA's relationship to Megaspeed? People should follow the law and people should want to help with that. Look, let's do a little super micro story here. This is another one of NVIDIA's biggest clients, which the Department of Justice a few months ago unveiled a criminal case on basically saying that they were doing exactly this. They have incredible evidence. There's video camera footage of, you know, C-suite leadership using hair dryers to get the stickers off of boxes so that they can, you know, smuggle this stuff into China.

37:00And a day or two before, you know, you had Jensen, like, smiling with this guy and taking photos with them. So the, look, if all Jensen and NVIDIA had to do was do their best to not let this happen. And if what you're doing is obfuscating and delaying and not being helpful, then you are, you know, I'm not a lawyer. I don't know if obstructing justice is exactly the right phrase here, but like, this is not being part, this is not the behavior of the sort of company that wants to get to the bottom of a problem, which is incredibly politically explosive for them. And the nearsightedness of them to keep on this when there is such a bipartisan consensus, at least on the narrow thing, which has stayed the law ever since 2022, that the most advanced chips can't be sent to China is frankly outrageous.

37:53Derek, I want to pull this thread as well, very quickly, because this is going to be important, I think, for the role you're going to take as a defense attorney here for NVIDIA, which is the case Jordan mentioned, Supermicro. This really is a case where you have the Department of Justice coming in with no ambiguity, no anonymous sources, the New York Times saying there's massive smuggling, really compelling evidence, as Jordan says. In the case itself, they're saying the conspirators here, the super micro executives are saying, we got to go faster because we have to move these chips out and smuggle them before the Biden rules take effect.

38:26So I think one of the things you'll have to argue for as an NVIDIA defense attorney here not just whatever happened in the Megaspeed case, but the broader theme that smuggling is a huge issue. And we, as I think a national security community, need to stop it and need to really up the enforcement. That strikes me. It's just really obvious at this point.

38:48Derek Thompson: All right, so here we go. I've had several on-background conversations with NVIDIA to understand their perspective on chip exports. And this is my best effort to capture how I think NVIDIA sees the AI race and why it militates for a more permissive attitude towards selling chips to China, beyond the obvious, which is they're a chip-selling company, and so they want to sell as many chips as possible, period. I think what they would say is, Ben and Jordan, you guys are so fixated on the fact that NVIDIA is technically breaking the law, specifically rules like the diffusion rule. The law is wrong.

39:28Derek Thompson: The law is not ethical or wise or prudent. If you think that AI is a few months away from becoming a machine god that will rise up and destroy the world, if you think that AI is basically the equivalent of a super weapon, then it's understandable that you see this race as akin to the nuclear arms race, where, you know, for example, we would never sell enriched uranium to the Soviet Union. But if you see AI as a normal but incredibly transformational technology, if you think this is electricity, if you think this is cars, if you think this is the iPhone, then this is a race about infrastructure, diffusion, and adoption.

40:10Derek Thompson: NVIDIA believes this is a race about infrastructure, diffusion, and adoption. Of course we would sell cars to China. Of course we would sell our best transformers to China. Our iPhones, Apple wants to sell into China. So if that's the best analogy for what AI will be, why wouldn't we want to sell China lots and lots and lots of our chips? Maybe not our very best chips, fine, but basically all of the others. If we don't, by the way, if we cut off China, if we don't sell them any chips, what's China going to do. China, we know, is a manufacturing and export juggernaut. They are incredible at taking a technology that they didn't invent, say electric cars or solar panels, and then mastering the art of manufacturing that thing at scale and for very, very cheap, and then dominating international manufacturing and exporting, as it's now dominating the international manufacturing and export of electric vehicles and solar panels.

41:10Derek Thompson: What's going to happen if we cut off China from American ships, from NVIDIA, they're going to build their own. Huawei will build their own. And then the future of AI all over the world, and now I'm really getting my David Sachs slash NVIDIA defense in here. The future of AI infrastructure will be built by China, not by America. That will make China stronger and America weaker. You guys are fighting to protect a law that is imprudently making America poorer in the long run because of this diseased assumption that AI is a machine god rather than just the next electricity. Ben, as an administration alum, as someone who advises for Anthropic, why am I wrong?

41:57Well, I'm also someone who wrote a lot of these policies in question. A small group of us wrote all of these. So I've spent six years of my life on this question. Let's take this in parts. During the four years of the Biden administration, two years rewriting the bitter struggle, we thought about this a lot. The first part is, I don't think you need to believe that AI is going to be a machine god in order to implement these policies. And I think you can look, for example, at the impact of AI on what you might call normal but vital national security matters, like cyber operations, where AI systems this year alone have found tens of thousands of vulnerabilities.

42:33Cyber operations are a domain in which the United States and China compete every single day. I happen to think AI is going to be incredibly important in many, many, many domains. And this was the predicate for some of what we did. And I think Jensen probably maybe isn't in the same spot on that. But even if you stipulate that AI will not get much more powerful than it is today, we've already seen AI's impact on things like cyber that are vital for national security, that I think suggests this is not cryptocurrency or something else that probably is not just going to move the needle very much on national security affairs.

43:02The stakes matter here. That's point one. Point two is implicit in what Jensen is saying, and actually in many cases, explicit in what Jensen is saying, is that China can make these chips. And China will, as you, in your role as the invaded defense attorney, will catch up. This is empirically false. And we know it's false because China has been trying to make these chips since 2014. America's off fighting ISIS in the Middle East. And China, Xi Jinping personally says, it's a huge problem. We are spending more money in 2014 in China importing chips than we're spending importing oil and more than$300 billion.

43:38And China says we're going to indigenize chip production. They spend upwards of$200 billion in public and private capital to try to build a chip industry. They fail because unlike making cars, unlike electricity, making chips is the hardest thing we do as a species. One chapter of this book we just wrote is a deep dive on the chip supply chain, because it's so important to understand just how challenging it is to orchestrate this process. And the Trump administration in its first term gets some credit for cutting China off an advanced set of technologies called extreme ultraviolet lithography technologies, which takes them out of the chip making business at the high end.

44:14The Biden administration comes in. We don't just cut them off from chips. We also cut them off from chip manufacturing equipment. The next year down, a portion of it called deep ultraviolet lithography, that hurts them further. And the net result is, even with pretty lax enforcement of these controls by the second Trump term, China still struggles to make chips. You don't have to take my word for it. Take the word of Howard Lutnick, the man at the center of this scandal, who testified in 2025 that China, all of China, could only make 200 ,000 chips. And each of those chips is something like one-fifth as good as a cutting-edge NVIDIA chip.

44:46That's not enough, 200 ,000, for even a single data center. So the notion that China could somehow run its own AI industry off domestically produced chips, the notion that China could somehow run its own AI industry off domestically produced chips is fanciful. Even more fanciful is the notion that somehow China is going to export this all over the world. They simply cannot make the chips. Again, there's never been a Chinese model trained on Chinese chips, and that's with good reason. Jordan? You know, you're a theater nerd. So I want to start to bring in the Shakespeare as we come to the end of this episode.

45:20Tis the sport to have the engineer hoist with his own petard. I mean, this is the fundamental tragedy of all of this, is that Jensen, the only, like Jensen, you started out as a gaming CEO and had this incredible vision for his technology to give birth to this AI revolution. And all of a sudden we have it, but he doesn't grapple with the larger consequences. Like he has this idea, which he really wants to grip onto because I think like at the heart, he is a globalist in kind of like the warmest, loveliest sense of the world. The chip, the semiconductor industry is a humanity-wide effort, which engineers all around the planet are contributing to, to bring progress and technology and improve our lives.

46:09But we've gotten to the point where what was once a gaming company and gaming CEO has become a critical input into national security, as Ben has alluded to. And the fact that he was not able to recognize and adjust to that is downstream of both financial interest and not wanting to recognize that. But I think a deeper ideological thing that, you know, confronting the fact that what he is doing is, you know, no longer fun and games, but like a serious, serious, serious national security thing, which could potentially, you know, define the fate of great powers in the 21st century was, you know, too much for him to really grapple with what the consequences of that realization would be.

46:54So what we've seen is him, you know, do everything in his power to have that reality not come true. And, you know, because he was, you know, because Trump won instead of Harris and because he was friends with all these guys, he pushed back his, you know, he pushed back the sell by date of that view by a few years. But the chickens are coming home to roost. You don't have to believe it's a machine. God, we're having cyber hacks every other day driven by NVIDIA hardware. And, you know, this is just the start. So it's a real, you know, it's a deep tragedy that the man that brought us this couldn't, you know, foresee and grapple with the consequences.

47:35And now he's out of a job and potentially facing very serious legal action because of it.

47:43Derek Thompson: Ben, what makes this story so interesting to me is that you can engage with it as a news consumer from so many different layers. If you're just interested in the sex scandal, it answers your questions there. If you're interested in the question of corporate espionage, the smuggling of one of the most important products in the world, it's very interesting in that regard. But also, as we've talked about a lot in the last 45 minutes, this is a policy tug of war. Behind the scenes, there has been a policy battle between those who I'll call China hawks, who want to restrict the flow of chips into China, both through direct sales into China and through this remote access and smuggling channel, and those who are much more permissive, not just Jensen Wong and maybe the general counsel of NVIDIA, but also folks like David Sachs, who was the AI czar under the Trump administration 2.0 for about 18 months or so.

48:38Derek Thompson: It seems like right now the China hawks are pulling more successfully on that rope in the tug of war because they've got a lot of material at their disposal to say, look, this is exactly what we said would happen. This is beyond the worst case scenario that we envisioned. What direction should we be pulling in now? Now, what is the wise path forward to support American interests? And, you know, without, let me, I'm afraid it's the last question just more succinctly. In what direction should we pull now? What is the wise policy we should be pursuing? When we were pursuing a lot of these policies in 2021, 2022, I would acknowledge that we were sort of trying to skate where the puck was going.

49:27We had a conviction about how good the technology was going to be, how much it would matter for national security, how central chips were to it. Now the evidence is in. And we did have, as you said, 18 months, my successor, David Sachs, had this mantra, let the private sector cook. Trying to, on the chip front and also more generally on the AI safety front, take the government out of the business. And I think that was born of a belief, similar to what you said, you know, NVIDIA has, that this technology doesn't matter that much. Of course, that's not my belief. But now the data is in. things that were once at least debatable hypotheses are pretty clearly conclusions about how important AI is to national security, how important chips are to AI.

50:03And now it's time for Congress to act. Because if the administration does not act, Congress needs to act. The good news is I think there's a pretty clear bipartisan consensus in Congress, even before the scandal, and now starting to deepen, that there's things that the U.S. government can and should do here. So the Match Act is a bill that bipartisan sponsors of that, that restricts China's access to chip-making equipment, something the Trump administration has really dialed back enforcement on in its two years in office. The Overwatch Act cuts off access to chips. Again, right what we've been talking about here.

50:36There's different bills of Chip Security Act that works against smuggling, bills to cut off remote access as well. Congress, I think, can and should pass these bills as part of the national defense bill that they're going to pass in probably December of this year. That is the first place to start. And then the Trump administration should really do a much better job of enforcement. It does seem like there's a lot of voices in the Trump administration. Jordan mentioned Marva Rubio. Scott Bessent was on TV this morning, basically saying everyone else in the administration except the Commerce Department wanted to put Megaspeed on the NT list that more aggressively cuts them off from things.

51:06So I hope there are voices in the Trump administration that are part of this bipartisan consensus. It seems like they are. Now is the time to act because the data is in.

51:15Derek Thompson: I want to use the time we have remaining to talk about winners and losers going forward. And I do think that, to Ben's point, one winner here is the policy case for more China hawkery. In terms of other winners and losers, I want to make three points, Jordan, before I go to you. First, I think a lot of people are trying to fold this into the question of whether or not AI is a bubble. And if you define the AI bubble by NVIDIA stock price, then it certainly looks like something has popped. To me, the AI bubble question is not so much what is NVIDIA stock price today, but rather is revenue growth rising fast enough to pay off the cash and debt being expended to build AI infrastructure?

51:51Derek Thompson: That's fundamentally a question about AI demand and AI revenue. And it's not entirely clear to me that Jensen Wong resigning or being pushed out has anything to do with say, how much does JP Morgan want to use AI? How much do healthcare systems want to buy artificial intelligence or use AI tokens? I think those are separate issues. And so I, as a first point here in my preamble to talk about winners and losers, actually don't think this is going to have a huge effect on the AI bubble question. And I'm interested if you agree, disagree with that. On other winners and losers that I see, winners I see as alternative chip makers, I do think NVIDIA might struggle in the medium term, and that benefits companies like AMD or Google or Amazon and smaller chip makers who might find buyers in a world where either NVIDIA innovation slows down or people lose that relationship to Jensen Wong that has been the linchpin of their business with NVIDIA.

52:47Derek Thompson: And the losers here, I think not only NVIDIA is a race car built for one driver being Jensen Wong. He has 60 direct reports. This is a company built to be manned by one man. And I think they're going to potentially struggle going forward, despite the fact that they have an enormous amount of cash. I think the companies that have relied on NVIDIA's largesse and their sort of de facto loan guarantees like the NeoClouds might struggle if NVIDIA consolidates its position to support its margins and drive back up its stock price. And finally, I think you guys have mentioned this a little bit, but Jensen Wang is probably the lead corporate spokesman for open weight models.

53:28Derek Thompson: And if they lose one of their most vocal supporters, I think that that's going to hurt the case for open weights versus the proprietary models being put out by OpenAI and Anthropic. So sort of making my sort of initial case here on AI bubble, winners and losers, I am interested in ending with each of your outlook on who the winners and losers of this scandal are. No disagreements on your three, Derek. I kind of want to come back to the human drama of this all. Look, this guy was a personal hero to so much of this industry, myself included. Look, I was like, you know, stealing$20 bills out of my parents' wallet to buy NVIDIA graphics cards like when I was 12 years old.

54:18I mean, this man truly, single-handedly had so much vision to be able to create this ecosystem. And the amount of people that have looked up to him across the industry is astounding. And to watch him, you know, break my heart once over the past four years by, you know, advocating policies, which I supremely disagree, I deeply disagree with, and then break my heart again, because like, okay, at least, but he's this nice family man and, you know, has been with his wife for 40 years. And then it's like, oh, that's, I guess that's all gone too. He's just kind of like this philandering jerk. It's like, you know, I think I'm hitting a lot of folks in the industry and it's going to take some time to sort of ripple through.

55:01So I feel bad for all the kids out there who've looked up to this guy who now just have one less person to look up to. I don't know, Ben. Ben, I don't know if you were also... Maybe you have harder takes than mine.

55:15Derek Thompson: No, Ben might also be like a Sega nerd who stole dollar bills from his parents' wallets in order to buy GPUs several decades ago. I don't think I stole anything, But I do vividly recall, again, not ill-funded, but I do vividly recall taking my NVIDIA graphics card when I was building my first computer and being so in a weird 12-year-old kind of way proud of like, yeah, this is a thing. So at some level, I'm with Jordan. I had personal interactions with Jenshin and the government that were very, let's say, spirited and so forth. And it doesn't change the fact, or for me, it didn't change the fact that this is a story that now I think is a tragic one.

55:55But at the time, he came to America when he was nine. This great sort of tale of coming without his parents, boarding school, and working his way really from nothing. He was a dishwasher at Denny's and all of that. So there is a story here that I think is ultimately a tragic one about Jensen. The reason why I would be a little bit less immediate in putting NVIDIA in the, you know, burying them and saying they're dead here is Jensen built a machine there. I mean, there's still, I think, 31 ,000 research engineers at NVIDIA. Those guys are going to keep doing their work. Those men and women are going to keep doing their work.

56:31NVIDIA, yes, they've had a very rough week in the stock market here, probably as well they should. But they're still up enormously. At the time, we did the original chip controls in 2022, when Jensen and the NVIDIA defense attorneys of the day were saying, these are going to bankrupt us or hurt us greatly and all of that. NVIDIA's market cap at the time was$350 billion. It was$5 trillion before the scandal. Maybe it's$4.something trillion now. But they're still flying pretty high. They still have a very good product. They still have gross margins that are 70 % or something. And I think as long as they continue to make good products, which maybe they can do it without Jensen, maybe they can't, there's going to be demand for them.

57:07And I'm so confident in the tailwind of demand for AI chips, which are so vital to the economy and to national security, that I think NVIDIA will survive this and will continue. but the human note is a good one on which to end because I do think there really was a personal tragedy here and again, self-inflicted for sure. That unfortunately probably also had pretty deep national security consequences for all of us. And as a policymaker, as a national security official, the system's got to do much better than it did in this case.

57:41Derek Thompson: I appreciate that now that you took the bait to go sort of classic end podcast, winner losers. I think the human note is a really good place to end here. And to Jordan's earlier point, there really is something Shakespearean to this Icarus rise and fall. Someone who takes a company, makes bet after bet after bet, insane bets over the course of his career to transform a gaming chip company into an AI Goliath and flies too close to the sun and sleeps with, you know, an executive at a company that is helping his own firm potentially break the law. It is an enormous tale of flying high and hubris.

58:21I don't often quote Lloyd Blankfein, but he had a great quote. The graveyards are filled with once indispensable men. Indeed.

58:29Derek Thompson: Well, let's end. We should always end on Lloyd Blankfein quotes of... Is that Levin? I got some Sophocles for you to take a down on. Oh, okay. Let's go with Sophocles. Great. It's Blankfein quoting someone else. I want to give it all to you. I think it's DeGaul. But while our eyes wait to see the destined final day, we must call no one happy who is of mortal race until he hath crossed life's border free. Jordan Schneider, Ben Buchanan, thank you guys. Thanks for joining me as I do an emergency podcast from this nondescript hotel room on a work trip. I really appreciate it. Thanks for having us.

59:07Derek Thompson: And now for today's final take, brought to you by Jira by Atlassian. Your work lives in scattered places. Jira taps into Atlassian's teamwork graph to bring that context together across Jira Confluence, Slack, GitHub, and more. It makes it easy to share with the agents you already use, like Claude, Cursor, and GitHub Copilot. Assign them work directly or connect your agents through Atlassian MCP. Learn more at jira.com. That's J-I-R-A dot com. So my final take today is one that we reviewed several times on today's show. I think lots of people are interested in this story as a sex scandal. And I'm already seeing on Twitter a debate emerge between folks aligned with Jensen Wong and folks sort of against NVIDIA about the degree to which Alice Wong's relationship with the Chinese government might have been overtorked, might have been exaggerated.

59:56Derek Thompson: Like maybe this whole thing was a conspiracy to falsely associate Alice Wong with the Chinese Communist Party, to push Jensen Wong out of NVIDIA, to punish the company, et cetera, et cetera. I think as people who listen to this show frequently know, I don't like conspiracy theories. I am maybe to a fault, maybe to a fault against conspiracy theories. I think they overwhelmingly lead us astray. And here it clearly leads us astray to over-focus on the question of who was the source who leaked to the Times and or CNN the information that might have exaggerated the relationship between Alice Wong and the Chinese Communist Party.

1:00:40Derek Thompson: That is not the most important story here. The most important story here is that there is a massive philosophical, strategic, geopolitical, legal debate that is all about whether or not the US government should be selling the most advanced AI chips to China or turning a blind eye to chips being sold or routed through Singapore and Malaysia that find their way into Chinese companies. That is the big question here. How should we think about AI chips? Are they like car engines where we want American manufacturers to sell them all over the world? We don't really care who buys them. Oh, France bought a car.

1:01:19Derek Thompson: China bought a car. Mongolia bought a car. Whoever, just sell the cars. Or is this more like enriched uranium where we would never sell enriched uranium to Russia? We would never sell enriched uranium to a Central Asian state that we believed was working with Russia that Russia could just take the enriched uranium that we sell into some country. I think clearly what you hear here from the guests that we have is that they think of the most advanced AI chips as being closer along that spectrum to enriched uranium than to car parts. And personally, I philosophically agree with them. And that is the question here.

1:01:56Derek Thompson: That's the main issue. Did Jensen Wong know that he was violating either the letter of or the spirit of the law by allowing chips to be sold through a Chinese intermediary whose managing director he was also having an affair with while she also might have been a Chinese spy. Like, that's the issue. And the, oh, also, she might have been a Chinese spy thing, I genuinely think of as a coda to the main dish here, which is, in this country, we deliberate over laws. Those laws are agreed on and voted on and signed on by people who we elect. No one elected Jensen Wong to be the Commerce Secretary of the United States.

1:02:49And so it is inappropriate for a chief executive of a private sector company to essentially play

1:02:57Derek Thompson: the role of Secretary of State and Commerce Secretary. And that, I think, is de facto what was happening here. That is the statesman-like role that Jensen had put himself in, and that's why I think his behavior was so inappropriate. Today's final take was brought to you by Jira by Atlassian. Jira is where your team and your agents work from the same context. The result, less token waste, better agent output, and more time moving work forward. This is how work gets done. Learn more at jira.com. That's J-I-R-A.com.

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