'Central role in ecosystem: If something happens to Nvidia, it's going to be a catastrophe'

Next, to more fallout from revelations that tech titan Jensen Huang had an affair with an alleged Chinese spy. Now, a shareholder is suing him and his company, NVIDIA, on accusations that they deceived investors by failing to disclose his affair with Alice Huang. The plaintiffs say that the failure posed a material risk, not only to NVIDIA's reputation, but also to its business prospects as well. Donald Trump, for his part, said Monday that he spoke with Jensen Huang on the telephone and believes that he was indeed unaware. But the woman in question was potentially working for China. Now, for more on this story, Raphael Dornano joins me on set for a closer look at the consequences of this scandal. She is the founder of Decoding Discontinuity, a research and investment firm focused on generative and agentic AI. Raphael, thank you very much for joining us today. Thank So could you start by perhaps giving us a feel for just how big of a deal this scandal is? you so What are the security, political or even economic implications? much for I mean, this is, I think, the most unexpected thing that could have occurred in this crazy AI trade. joining Lots of things are going on. The markets were crazy last week and Anthropic's pricing just came today. So this was unexpected, I would say. us today. Look, NVIDIA has an absolutely central role in the ecosystem. It is not just a supplier anymore. It is one of the biggest, it is the biggest counterparty, just to give you a sense of numbers. The accounts receivable of NVIDIA has almost reached $70 billion in Q2 earnings, sorry. Q3 earnings are expected November 17, so everyone is waiting for that. NVIDIA has guaranteed over $100 billion for a recent Ohio data center for OpenAI. NVIDIA has invested $30 billion out of the $100 billion that were pledged to OpenAI, only $10 billion in Anthropic to give you a sense of the difference. It's different, so it's... Something happens to Nvidia, this is the most central player and Nvidia is the actor that is allowing everything to work. Starting with France, Nvidia's chips are the ones that are being used to construct European sovereignty here in France. Now more specifically Raphael, why is Nvidia such an essential component to the wider AI economy? NVIDIA's chips are the only capable today. I mean, they are, of course, alternatives that have emerged and strong alternatives, AMD amongst them. And, of course, all of the ecosystem that is being built by Amazon Trainium, which is one of the key suppliers of Entropic, again, that is going to IPO. But NVIDIA has a technological advance, not just on the chips, but on the software layer that they have been able to build with CUDA over the years. NVIDIA is one of the key actors in open source AI and is appearing as one of the alternatives. Versus Chinese open source models and those developments have progressed a lot. So it's not just the chips. It's gone from how does this whole AI system function and how do the data centers that are being built work correctly at the best speed and latency with the NVIDIA ecosystem. So if something happens to NVIDIA. It's going to be a catastrophe. Just to give you a sense of the proportions, NVIDIA today represents 7% of the S&P 500. It was closer to 8% a couple of months ago. It's already gone down a bit. But those are huge numbers and huge prospects. So concretely, I mean, you hinted at it there, but what would the consequences be then to the wider U.S. tech industry if Alice Wong was able indeed to obtain sensitive information or at the least get around U.S. export controls to get NVIDIA's sophisticated chips into China? Well, look, I think... Building the best models and remaining at the frontier, like this is the term that really matters in the AI trade, is the biggest fight. on Earth right now between the US and China. Staying at the frontier is critical for these businesses to even work. It's otherwise AI is not economically viable. We have seen that the advance of the United States has maybe lowered to a certain extent with the rise, the very fast rise of Chinese open source with models from From Qwen, of course, from DeepSeek that rattled the markets early 2025. And so the emergence of this open-sourced ecosystem by which China is entering, more than entering, is in the AI race, if they're able to have the chips that allow them to continue to have those fast-paced developments, this could be a threat to the U.S. frontier labs, which are clearly ahead today. And the release of Claude 2 just yesterday, again, ahead of Anthropic's IPO, matters. And the numbers are absolutely fascinating. It's very much ahead from a frontier perspective. Remaining in that position is what matters the most for the U.S. today, in closed source, but also in open source. So NVIDIA was already in possibly troubled waters before this scandal, given all of the details that you've just laid out there about how important it is to the wider AI industry and the already nascent concerns about a bubble. Do you think this could be the start of a bubble bursting? And how does Anthropic's IPO potentially play into that? Look, I think NVIDIA is not going to go away. Again, there will be consequences. There will be NVIDIA's board. I have complete trust in NVIDIA's board that is currently investigating this matter, so there might be consequences that I do not know at this stage. Will NVIDIA as a company collapse? I do not think so. Of course, one of the things that has been... Put forward is that there is no succession plan. Jensen Huang has founded this company in 1993, has 60 direct reports today. So he's at the center of this company. So if he goes away, then there's a bigger problem for NVIDIA. We are not there yet at all. And again, he remains critical in this ecosystem. I think that the numbers and the prospects that we're seeing from Anthropic's IPO and the fact that it's actually well received are showing that we are at the very beginning of this AI trade. When you look at the fundamentals of the AI trade, nothing is heard. Yesterday, NASDAQ was up a lot after having a very troublesome week after the midterms in the US. NVIDIA was the only company that was down 4% yesterday in reaction to the scandal, if I may say. But there is no. The consequence of this being the beginning of a bubble, in any case, it's a different debate. So it sounds like you're quite optimistic, then, about the industry's ability to overcome this challenge. Very. Jensen Huang has said that he will cooperate with the investigation, like you said. You think he'll be able to survive this scandal, then? He made a mistake. He apologized for his mistake. I'm no one to judge what he did, and I do not have more information than, again, so I'm no one to judge. I hope that things will be constructive for him as an entrepreneur, for him as the CEO of NVIDIA, for what NVIDIA represents to this global AI trade, and I'm sure that we will have constructive solutions that will be laid ahead. Again, this is a massive shock, but there are massive shocks in the public markets and in the AI trade, approximately twice per day. Of course, this is a bigger one. Things tend to move forward. Donald Trump is famously motivated by the ability to make deals. In this case, it looks like he was hoping to avoid irking NVIDIA or Beijing, given that he was potentially made aware of these allegations months ago, if not more. Is there a world in which the White House is able to please both NVIDIA and Beijing without sacrificing the greater interests of the United States? On this, I think I would be less optimistic. Look, there is a real war happening here. It's an economic world. AI is a huge discontinuity, as I refer to it. These are opposing forces very clearly today, both from a frontier model perspective, but also from the whole semiconductor trade and the chips that are being built. So you cannot ignore the huge competition and the stakes that are here. If one or the other country takes the lead, This could be critical not just from an economic perspective but from a defense perspective and have much broader consequences for humanity so on this I would be less optimistic than on the ability of Jensen and NVIDIA to actually move forward. Moving beyond NVIDIA, Rafael, as a final question for you, we saw massive gains, obviously, for the Democrats in last week's midterm elections. A part of those gains was centered on essentially states where people were very critical of data centers. Do you think that that is maybe going to become a burgeoning problem for the industry moving forward? Look, the problem around data centers is nothing, but it's not new at all. It's been ongoing. I think the biggest shock that happened was in Texas, where Texas is a huge number of gigawatts. And the governor that was elected is in opposition to many data centers supported by the population. So, uh... CoreWeave, for example, the next day sent a letter to the governor to be constructive and CoreWeave is reporting earnings today and has been at the center of this neocloud blowout which is happening right now. This problem is not new. Will AI stop because of data center opposition? Probably not. Why? Because the U.S. has to be at the frontier and has to win this race. So on here again, I am constructive because of that, and I am sure there will be solutions that will be found for this to be done critically. I'm more worried around the capital constraints and the cost of capital of constructing those data centers today and of financing those neoclouds when you see the yields that are going up. by the political opposition, which is here, but which will be dealt with in the next months, if not in the next weeks. Only time will tell then. Raphael Dornano, thank you very much for joining us. Founder of Decoding Discontinuity, a research and investment platform focused on generative and agentic AI. Thank you very much. Thank you.