The AI Race: Jensen Huang's Spy Scandal Puts US-China AI Chip War Under Spotlight

The global race for artificial intelligence is increasingly being fought not just over software, algorithms and data, but over the hardware that makes them possible. At the centre of this contest is a small group of companies controlling some of the world's most advanced semiconductor technology, with the United States and China competing for access, influence and technological independence.

The controversy surrounding Nvidia chief executive Jensen Huang has brought this rivalry back into focus. On November 8, Huang acknowledged an extramarital affair after reports emerged that the woman involved was suspected of being a Chinese intelligence operative. Nvidia's board has since initiated an independent investigation into whether Huang was the target of a foreign intelligence effort, while maintaining that it has no reason to believe national security or company secrets were compromised.

The allegations have added another dimension to an already complicated relationship between Washington, Beijing and Nvidia. Huang has spent years lobbying the US government to ease restrictions on selling advanced AI chips to China, arguing that shutting Chinese companies out of the American technology ecosystem could ultimately strengthen domestic competitors.

But why are these chips so important, and how has control over their production become a central battleground in the US-China rivalry?

Who Controls The Global AI Chip Supply Chain?

Very few companies in the world possess the technology required to manufacture the most advanced semiconductors. The global supply chain is concentrated around three major players: Nvidia, Taiwan Semiconductor Manufacturing Company (TSMC) and the Netherlands-based ASML.

Nvidia designs the graphics processing units (GPUs) that have become essential to developing and running artificial intelligence models. Unlike conventional processors, GPUs can perform large numbers of calculations simultaneously, making them particularly suited to the enormous computing demands of AI.

However, Nvidia does not manufacture its own chips. It relies on Taiwan's TSMC, the world's leading contract chipmaker, to produce them.

TSMC, in turn, depends on specialised equipment manufactured by ASML. The Dutch company is the only manufacturer of extreme ultraviolet (EUV) lithography machines, which use light to print extremely fine circuit patterns onto silicon wafers. These machines are essential to producing the most advanced generations of semiconductors.

The equipment is extraordinarily complex. Some of ASML's most advanced machines are roughly the size of a school bus and weigh around 180 tonnes.

China has not yet managed to match the capabilities of these three companies. This dependence has given Washington considerable leverage over Beijing's access to advanced computing technology.

How The US Restricted China's Access To AI Chips

Washington's efforts to restrict China's semiconductor capabilities have developed over several years.

In 2018, the US began pressing the Netherlands to prevent ASML from selling its EUV lithography machines to Chinese customers. ASML has maintained that it has never shipped an EUV machine to China.

The restrictions expanded significantly on October 7, 2022, when the US introduced sweeping export controls on advanced computing chips and semiconductor manufacturing equipment.

The Commerce Department's Bureau of Industry and Security (BIS) said the measures were intended to restrict China's ability to purchase and manufacture high-end chips that could be used in military applications, including advanced weapons systems.

The restrictions also limited the ability of American companies and citizens to support advanced semiconductor manufacturing at certain Chinese facilities without government authorisation.

Nvidia initially attempted to work around the restrictions by developing less powerful versions of its chips specifically for the Chinese market. These included the A800 and H800 processors.

However, Washington introduced new performance thresholds in October 2023, effectively closing that route. Nvidia subsequently developed another China-specific chip, the H20.

The Netherlands also tightened its restrictions. From September 2023, ASML required Dutch government licences to export certain advanced deep ultraviolet (DUV) lithography machines to China. These machines are older and less precise than EUV systems but remain important for semiconductor manufacturing.

The Battle Over Chip Smuggling

Despite restrictions on direct exports, Washington has faced another problem: preventing advanced American chips from reaching China through third countries.

In March 2026, US federal prosecutors charged Supermicro co-founder Yih-Shyan 'Wally' Liaw and two others with allegedly diverting servers fitted with restricted Nvidia chips to China.

According to the indictment, a Southeast Asian company purchased approximately $2.5 billion worth of servers in 2024 and 2025, using false documentation that identified it as the final buyer. The equipment was allegedly repackaged and subsequently shipped to China.

Prosecutors also alleged that non-functional replica servers were staged at warehouses to deceive auditors inspecting the shipments.

Supermicro has said it is cooperating with the investigation and is not a defendant in the case. Liaw has pleaded not guilty.

A separate investigation involved Texas businessman Alan Hao Hsu, who pleaded guilty in October 2025 to participating in a network that allegedly exported or attempted to export at least $160 million worth of Nvidia H100 and H200 chips to China.

The Jensen Huang controversy has also drawn attention to Singapore-based data centre company Megaspeed International. The company has faced scrutiny over allegations that it helped Chinese companies access restricted Nvidia chips through facilities in Southeast Asia.

Megaspeed has denied wrongdoing, while Nvidia has said its own investigation found no evidence of chip diversion.

Why Jensen Huang Wants Access To China

Huang has consistently argued that restricting Nvidia's access to China could prove counterproductive for American technological leadership.

His argument is that Chinese companies will continue developing artificial intelligence regardless of whether they can purchase American chips. If Nvidia is excluded from the market, domestic companies such as Huawei will have greater opportunities to establish themselves as alternatives.

In May 2025, Huang described US export controls as a failure, saying Nvidia's share of China's AI chip market had fallen from 95 per cent at the beginning of the Biden administration to around 50 per cent.

The Trump administration subsequently introduced another policy shift. In December 2025, President Donald Trump announced that Nvidia would be permitted to sell its H200 chips to approved Chinese customers, subject to a 25 per cent fee for the US government. The change took effect in January 2026.

However, Beijing has also restricted the use of American chips in parts of its domestic technology ecosystem. Nvidia has reported limited H200 sales to China, while Chinese authorities have directed new state-funded data centres to use domestic AI processors.

By May 2026, Huang acknowledged that Nvidia had largely conceded China's AI chip market to Huawei.

How China Is Building Its Own AI Hardware

China's response to American restrictions has focused on developing an independent semiconductor ecosystem.

Huawei has emerged as one of the country's most important alternatives to Nvidia. Its Ascend AI processors are manufactured by Semiconductor Manufacturing International Corporation (SMIC), China's largest contract chipmaker, using an enhanced version of its seven-nanometre manufacturing process.

The nanometre measurement broadly indicates the scale of semiconductor manufacturing technology, with more advanced processes allowing increasingly dense circuits. Huawei's processors still lag behind Nvidia's most advanced offerings, but the company has committed to releasing new generations of Ascend chips annually through 2028.

China is also attempting to develop the machinery required to manufacture advanced semiconductors independently.

In December 2025, Reuters reported that Chinese scientists had developed a prototype EUV lithography machine with assistance from former ASML engineers. The machine can generate EUV light but has not yet produced working chips. While Beijing is targeting 2028 for that milestone, people involved in the project told Reuters that 2030 may be a more realistic timeline.

China has also begun restricting American technology in its domestic market. In November 2025, Beijing directed new state-funded data centres to use only Chinese AI chips.

Yet demand for Nvidia technology has not disappeared. ByteDance, Alibaba and Tencent reportedly ordered more than three million Nvidia RTX PRO 5500 workstation chips in October 2026, worth over $35 billion at list prices. These processors are less powerful than Nvidia's most advanced AI chips but remain available for sale in China.

What Happens Next?

The latest controversy involving Huang could further complicate Washington's efforts to balance national security concerns with the commercial interests of American semiconductor companies.

The US Congress is considering additional restrictions through its annual defence policy legislation. The Senate version includes the AI Overwatch Act, which would give Congress greater authority over advanced chip exports; the Chip Security Act, which would require location-verification mechanisms in exported chips; and the Match Act, which would encourage American allies to impose further restrictions on semiconductor manufacturing equipment exports to China.

Nvidia is understood to oppose some of these proposed measures. Huang has also been asked to appear before a joint meeting of House committees on November 18.

The developments come as Trump prepares to meet Chinese President Xi Jinping at the APEC summit in Shenzhen. The meeting could have implications for the broader technology and trade relationship between the two countries.

The rivalry is not limited to access to Nvidia's processors. China also controls significant portions of the global supply of gallium and germanium, metals used in semiconductor manufacturing. Beijing introduced export licensing requirements for both in 2023 and subsequently expanded restrictions on rare earth exports in 2025.

This gives China its own leverage in the technology supply chain.

Ultimately, the contest over AI hardware is about more than which country can produce the fastest processor. It is about who controls the infrastructure that will power the next generation of artificial intelligence, and how much technological dependence either superpower is willing to tolerate.

With inputs from agencies.