What “They” Don’t Want You to Know About NVDA

The “Chinese Spy” Narrative is BS

From the get-go this week, everything about the Nvidia Honeypot Saga seemed a little “off.”

CEO Jensen Huang climbing into bed with a Chinese spy? After spending years pleading with both the Biden and Trump administrations to loosen up on rules limiting the export of Nvidia’s state-of-the-art chips to China? 

Oh obviously he fell for a honeypot scheme engineered by the Chinese Communist Party aimed at undermining America’s AI dominance.

Sorry, the narrative is just too tidy.

Here we are, five days after the scandal broke wide open, and even now the only evidence we have that Alice Huang (no relation to Jensen) is a Chinese spy is… the claims of U.S. intelligence officials speaking anonymously to mainstream media outlets. 

Like a dog with a bone, The New York Times continues to gnaw on the narrative today, hard… 

If your response is It’s still early, wait for the wheels of justice to do their work… that’s going to be a mighty long wait. 

Any indictment by the feds would be strictly a publicity stunt; as long as Alice Huang stays holed up in China or Hong Kong, she’s safe from extradition to the United States.

And if your response to that is Oh yeah Mr. Smarty Pants, what’s your alternative explanation?... 

… well, that’s not the point today.

The point is that there’s evidence that runs counter to the mainstream narrative… and special interests who don’t want you to know about it. 

Let’s go…

Contrary to the media’s breathless claims, it is highly likely that Alice Huang was working at cross-purposes with the Chinese government.

As colleague Adam Sharp wrote Tuesday at The Daily Reckoning, the Biden administration cut off exports of Nvidia’s high-end GPUs to China in August 2022. The scheme backfired in spectacular fashion — prodding Chinese firms to develop their own GPUs that might not be as good as Nvidia’s, but were much cheaper and “good enough” for many customers.

In a post on X, a French tech entrepreneur who’s spent many years in China takes the analysis a step further: “The Chinese government actually doesn't want Nvidia chips and is actively keeping them out of the country,” writes Arnaud Bertrand.

Right now there’s a shipment of 600,000 Nvidia H200 chips — a model still eligible for export to China — sitting on the dock in Hong Kong. Beijing won’t let them in. The Chinese government wants Chinese buyers to acquire Chinese chips from Chinese firms like Huawei and Cambricon.

“Which means that the notion that Chinese intelligence was running honeytraps to get more Nvidia chips into China gets the whole thing exactly backwards,” Bertrand says.

“In fact, it looks like Megaspeed — Alice Huang's company — was a counter-reaction to official Chinese policy: a private-sector workaround to these efforts by the Chinese government to curtail Nvidia.” 

See, Megaspeed built data centers in southeast Asian countries using Nvidia chips — and then rented access to the Chinese tech giant Alibaba. Megaspeed was skirting both Washington’s export controls and Beijing’s attempts to protect China’s homegrown chip industry from competition. 

(Ingenious, really.)

“To believe the spy story,” Bertrand concludes, “you have to believe that a person — Alice Huang — was effectively a spy paid by her own government while simultaneously sabotaging its tech self-reliance drive, which it has spent years and trillions of dollars on.”

Regardless, there are a whole lot of people in Silicon Valley, in Washington, D.C. and in the media who are deeply invested in having you believe Alice Huang is some sort of modern-day Mata Hari. Read on…

The Media, the Politicians… and Anthropic

Begin with corporate media’s role in this sordid saga.

During a New York Times podcast posted on Tuesday, Times reporter Tripp Mickle let it slip that it wasn’t U.S. intelligence officials who tipped off the paper to the Megaspeed story. Nor was it someone from an anti-Beijing think tank in Washington like, say, the Heritage Foundation.

Rather, he said it was “a tech industry contact.”

Gee, maybe a contact from a company that’s hostile to Jensen Huang’s stance against export controls? 

Or maybe a contact from a company that’s hostile to Huang’s support for “open source” AI models and not the proprietary models of OpenAI and Anthropic?

A lot of people online have jumped to conclusions that the contact in question is Jack Clark — one of seven co-founders at Anthropic, currently the firm’s head of policy.

At this time, there’s no smoking gun to support that claim. But the circumstantial evidence pointing to Anthropic is abundant.

Start with the personal animus between Jensen Huang and Anthropic CEO Dario Amodei.

In the book The AGI Chronicles, tech journalist Kevin Roose describes their first meeting in May 2022 at a San Francisco restaurant. Huang was outraged that Anthropic was looking to buy a competing model of chip from Google; Amodei dismissed Huang’s plans for the world’s biggest data center as “kind of Trump-like.”

Then there’s an Anthropic-funded public-policy nonprofit called Public First Action. It was founded last year by two former congressmembers — Brad Carson (D-Oklahoma) and Chris Stewart (R-Utah). 

This year, Anthropic has plowed $40 million into the organization. In general, Public First Action’s policy objectives sync up with those of Anthropic — more AI heavy-handed AI regulation that Anthropic has the funds and personnel to comply with, but that upstart competitors would not. 

More specifically, Public First Action supports… tighter export controls on advanced AI chips.

In addition, Public First Action has an affiliated super PAC that backs candidates who support tighter AI regulation. Dario Amodei personally gave $1 million to this super PAC last May.

Which brings us to the outrage of the politicians. It’s mostly bipartisan — but Democrats especially smell blood in the water.

To wit, Sen. Elizabeth Warren (D-Massachusetts)...

If Huang agrees to testify to Congress, the grandstanding from both sides of the aisle will be insufferable. But Democrats in particular sense an opportunity to smear Donald Trump as “soft on China.” 

Many of the corporate media stories labeling Alice Huang as a Chinese spy also claim that Trump was briefed last May about the Huang-Huang affair before Jensen Huang and other Big Tech executives joined Trump on a trip to China — and Trump blew it all off.

(We’re supposed to take the usual “people familiar with the matter” at their word on this.)

“Democrats have been more hawkish on China than Trump, in both words and actions,” independent journalist Glenn Greenwald tweeted yesterday. Exhibit A is still Nancy Pelosi’s provocative visit to Taiwan in 2022 when she was House speaker. 

“Warren's tweet,” Greenwald continues, “is a preview of how Dems intend to use the Huang/Nvidia issue to attack Trump on China from the right: He was warned about this ‘national security threat’ (Nvidia selling advanced chips to China) but did nothing because he and his major Wall Street and Silicon Valley donors are in bed with Beijing.”

The hostility among leading Democrats toward Beijing aligns with the hostility of… Dario Amodei. As you’ll see in Bullet No. 3…

Dario and China and an “Eternal 1991”

Anthropic's Dario Amodei is an ardent China hawk.

This fact runs counter to the narrative that Amodei is some sort of peacenik — a narrative fed by a dispute that Anthropic had with the Pentagon earlier this year over the military’s use of Anthropic’s models.

The reality is that “Amodei’s geopolitical views overlap with those of neocons and many liberal interventionists,” writes Robert Wright — author of The God Test: Artificial Intelligence and Our Coming Cosmic Reckoning. “He sees the world as a global struggle between democracies and authoritarian autocracies — China in particular — and thinks the former should use superior weapons technology to dominate the latter.”

It’s obvious if you have the patience to sift through Amodei’s tedious and self-important blog posts. A piece from last January, for example, invokes the “existential imperative” of preventing China from taking the lead in AI.

In an October 2024 article called “Machines of Loving Grace,” Amodei spells out a utopian endgame…

… it seems very important that democracies have the upper hand on the world stage when powerful AI is created. AI-powered authoritarianism seems too terrible to contemplate, so democracies need to be able to set the terms by which powerful AI is brought into the world, both to avoid being overpowered by authoritarians and to prevent human rights abuses within authoritarian countries.

My current guess at the best way to do this is via an “entente strategy,” in which a coalition of democracies seeks to gain a clear advantage (even just a temporary one) on powerful AI by securing its supply chain, scaling quickly and blocking or delaying adversaries’ access to key resources like chips and semiconductor equipment…

If we can do all this, we will have a world in which democracies lead on the world stage and have the economic and military strength to avoid being undermined, conquered or sabotaged by autocracies, and may be able to parlay their AI superiority into a durable advantage. This could optimistically lead to an “eternal 1991”...

Amodei was 8 years old when the Soviet Union dissolved in 1991. Obviously he feels as if he missed out on the Cold War and wishes to recreate it now with the part of the Evil Empire played by Beijing. And plenty of politicos in D.C. are eager to help him indulge his fantasies.

Again, we should be careful about jumping to conclusions here.

It’s tempting to say this whole fiasco has been orchestrated by Dario Amodei in cahoots with leading Democrats and mainstream media. 

After all, the first New York Times stories about Jensen Huang’s “close relationship” with Alice Huang came out shortly before Election Day — and the scandal became front-page news shortly after Election Day (which was a Democrat rout).

It’s a remarkable confluence of events that puffs up Anthropic ahead of its IPO next Thursday… and blows up any detente that Donald Trump might have hoped to achieve with Xi Jinping when they meet in Shenzhen, China — also next Thursday.

But like the mainstream narrative, this also is too tidy — not least because it glosses over the fact that Jensen Huang, all on his own, made the catastrophically debauched decision to hook up with an executive from one of Nvidia’s partner firms.

At least now, however, you know a thing or two that Amodei and the politicos and the media would just as soon you don’t.

Before we move on, we should address what all this means for NVDA, the stock, post-Huang…

NVDA After Huang

For the record, Nvidia is a pick in Altucher’s Investment Network. Even after this week’s upheaval, NVDA is up 242% from an initial recommendation in September 2023.

What does James Altucher say now?

“I get why people are panicking. But I know what a day like this does to your judgment,” he posted yesterday on the Paradigm Press mobile app — not long after Huang resigned.

“The week the market reopened after 9/11, I doubled down every day, and by Friday I was down to my last dollar and had to sell. That was 10:26 in the morning. A minute or so later the market turned around and went straight up for three months.

“So now when I see a headline like this one, I ask what actually changed.

“The CEO changed, and the orders already placed didn’t.

“Jensen made a bad decision and he’s paying for it, but Nvidia is a lot bigger than one man. Even now it’s worth just under $4 trillion, and roughly $10 trillion of data centers are planned through 2032, every one of them hungry for chips. Colette Kress, the CFO, is running things in the meantime, and one analyst says existing orders should help the company weather the scandal.

“Yes, there are questions. Congress wants to look at chip sales to China, and the board has to find a permanent CEO. I can’t tell you how those turn out, but I like the company’s chances.

“The first real answer comes Tuesday, when Nvidia reports earnings, and I’m looking forward to it. I’ll be reading it for how busy those data centers are and for the companies making the pieces around the chip, which is where I keep my attention.”

With that, let’s move on to the markets today…

Markets Today, Etc.

At this stage the Federal Reserve is certain to raise short-term interest rates next month. The only question is by how much.

The Labor Department served up the October wholesale inflation numbers — up 0.3% month over month and a blistering 6.5% year over year, the fastest pace since late 2022. These increases will feed through to the consumer next year.

For the moment, futures traders assign a 92% probability the Fed will goose the fed funds rate from 4.0% to 4.25% in December. But there’s still an outlier chance of a supersized hike to 4.5%.

Amid that backdrop, the S&P 500 is down nearly 1% and approaching 7,500 — definitely on the lower end of its trading range the last three months. The Nasdaq is down 1.6% and back below 25,000. 

Nvidia is down another 3.8% as we write. Meanwhile, Bloomberg reports that Anthropic’s IPO “will exclude institutional investors based in mainland China and Hong Kong.” (Please don’t tell me you’re surprised.)

If it weren’t for Jensen Huang the big market story this week would be Treasury yields ripping higher — from 4.86% last Friday to 5.13% as we write. 

That’s an earthquake in the bond market. Traders already anticipate the new landscape in Washington: Democrats will go along with Republicans’ demands for higher military spending, Republicans will go along with Democrats’ demands for more handouts, and Washington’s red ink will turn from a flood to a deluge.

Precious metals are licking their wounds after yesterday’s pounding — gold at $3,877 and silver under $49. Bitcoin has collapsed under $69,000 for the first time since August and Ethereum is down to $1,925.

U.S. oil futures are flat at $88.61 even though in the last 24 hours U.S. forces struck an Iranian telecommunications tower and Iranian forces responded with a strike on a U.S. radar in Bahrain.

Oh — the big Microsoft outage doesn’t seem to be doing much to MSFT’s share price. It’s barely budged since Wednesday. Anecdotally, the Outlook account I use for work (and the 5 Bullets mailbag) has been operating normally since about 7:00 a.m. EST.

And with that we’ll wrap up the week with a chuckle hot off the meme-o-sphere…