Nvidia fallout and China ties

About a moment ago, NVIDIA's chief executive, Jensen Huang, resigning following reports that he had affairs with two women now. That scandal shaking Wall Street this morning. Markets did start down, but they are back on the upswing, all three major indices. And NVIDIA stock, though, that is still suffering, down nearly nine points this morning to $164 a share, just less than $165 a share. So. On an interim basis right now, Chief Financial Officer Colette Kress, she will take over the role while the board searches for a permanent CEO. Huang's departure removes one of President Donald Trump's most trusted Silicon Valley allies and one of the artificial intelligence industry's loudest cheerleaders. At a time when lawmakers are figuring out how to respond to voter anxiety that the technology will lead to massive economic disruption. To expand on this breaking story now, we welcome Nick Reese, adjunct assistant professor at NYU SPS's Center for Global Affairs. Nick, thanks for joining us this morning. Good morning, Andre. It's great to be back. All right, so someone who studies these things. Nick, you're seeing all of this play out. That surprising news coming out of Jensen Huang stepping down here. Give us your thoughts. Well, what we're seeing is really fundamentally a homeland security issue. We have to take care to defend and protect our innovation ecosystem that produces all of these AI capabilities, the chips that underline the infrastructure. And that is something that we're seeing now that is impacting one of the most valuable companies at a very critical time for the US ecosystem. And for the White House. All right. One of the big things that came up here is the export controls that were being sidestepped here. These NVIDIA chips that are not supposed to be in China, but they were sent to apparently a shell company in Singapore. And those advanced chips then shipped to China. One thing that I've found that coming out of this whole thing is that this type of movement to get advanced chips into China is nothing new. That, you know, this has been something that's been known in the industry for years of these shell companies funneling these chips into China. What do you make of that development in all of this? Well, you're absolutely right that this is something that's well known. We've known about sanctions evasion. We've known about black market chips and things like that being available in not just China, but in other countries as well. But the part about this that I think that we should pay more attention to is that there's actually been a US government policy change to actually sell these chips directly. And that really creates a much larger volume of availability of these To what the White House and the government has called a US adversary. And so if we are in a competition with China over AI, which a lot of people would agree with, then. Selling these chips directly as infrastructure to that adversary creates some real policy challenges. And then we have to consider what we're witnessing right now, Jensen Huang's relationship with this woman that headed this company, Megaspeed, in Singapore, his closeness to President Trump. Jensen Huang has been someone that has been a proponent of selling these chips, but he's a businessman, of course, this is his company, and he wanted to sell more to China. So how much of that influence, I guess we have to weigh. Of getting influence and getting the US to sell these chips to China came from Jensen Huang, right? Yeah, that's correct. And this is why I hope that for this story, we can look past the palace intrigue and the billionaires behaving badly aspect. And we can start to look at what really took place here and that shift that you're talking about. And so because Jensen Wong is the head of a company that is trying to find larger markets, Does not mean that. He wasn't also influenced. So these two things can exist at the same time. And what it creates is a question mark around a lot of policy decisions and a lot of influence that Jensen Huang has historically had at the White House. Nick, I was speaking to another professor about this as we try to get as many voices to better understand what's happening here. And according to reports, we had hundreds of thousands of these advanced Nvidia chips now in China right now. Danger does this pose to the United States and our edge that we have over China at this point? Well, it's exactly what you said. It's that it risks our edge. It risks that we don't stay ahead, that we do not have the frontier models, that we're not in control of the next phase of frontier model development. And if that's true, then the AI reality, to the extent that we do understand it, will no longer be controlled by US companies or by US values. And that puts an entirely different spin on what we think about as far as frontier AI. The effects of that AI and how we think about things like AI safety and assurance, because as we're talking about AI safety and assurance in the US, that may not be the case in China. And so we really have to think about what would it mean if the US was not in the lead or if our lead was substantially eroded. And fundamentally, it comes down to that infrastructure and those chips are the fundamental piece of that infrastructure. Could that shift? The infrastructure, because we have the infrastructure in place, we're the ones kind of piloting things right now. Could something like what we're seeing play out right now fundamentally shift control of how this whole process works that has kept us in the lead of this technology for so long? Well, right now we know for sure that Chinese models are often distilled from U.S. models because U.S. models are built and engineered on some of the best hardware with the best talent in the world. And so Chinese models. Historically, lag behind US models by a six-month pace, at least. Now, if we create the conditions where China has the infrastructure, the funding, the talent to create its own without having to rely on US intellectual property, then Again, we fundamentally changed the entire system, but this system might not change immediately. It might take some time. There could be some lag because we are talking about the infrastructure layer here. Yeah, what we're talking about with you, Nick, is really what this all means. I know everyone's caught up with the affair, but what is what the affair could lead to, what Jason Wong's stepping down and what happened in between all that could lead to. Nick Reese, I appreciate your insight this morning. Hopefully the viewers do too. Professor at NYU SPS Center. For Global Affairs, we appreciate your insight this morning. Thank you. Thank you, Andre.