Well before reports emerged that former Nvidia CEO Jensen Huang was having an affair with a suspected Chinese spy, the advanced chips made by his company were at the centre of the race between the US and China to dominate artificial intelligence.

The scandal now threatens to intensify that rivalry.

As President Donald Trump prepares to meet with Chinese President Xi Jinping next week in China, lawmakers on both sides of the aisle in Congress are seizing on the affair to press for tighter restrictions on technology exports to protect America’s edge.

“The scandal, in many ways, encapsulates the rivalry, where concerns around national security, export control, and foreign policy get intertwined,” said Lian Jye Su, a chief analyst at London-based technology research and advisory group Omdia.

At the heart of the competition to build the most advanced artificial intelligence is the race to access the most powerful AI chips. US-led restrictions have barred China from getting the world’s most advanced AI chips, a strategy that has led Beijing to accuse the US of pursuing an AI monopoly.

Once commanding some 95 per cent of market share in China, Nvidia’s sales to China have plummeted due to the export restrictions, first applied during the Biden administration. After Huang lobbied Washington to loosen the limits on sales of Nvidia chips to China, Trump earlier this year greenlighted the export of its highly-advanced, though not the most powerful, H200 chips.

Trump has spoken admiringly of Huang – a man at the center of the AI boom Trump has been keen to promote – and the two have talked regularly during his second term, including at least twice this week as the scandal grew around the tech executive.

That strategy was effective in slowing down Chinese companies, Yuan said, but it assumed the primary threat was the physical hardware, not access to leaders like Huang.

Yuan said what he called “China hawks” in Congress – who have been bullish on oversight and stronger export controls long before this incident – will now have “a story with a name and a face” to support their argument.

“I don’t think anybody in Washington wants to be seen as loosening the controls on chip exports to China right now,” he added.

This week several congressional Democrats wrote to Commerce Secretary Howard Lutnick to ask what officials knew of Huang’s affair with a reported Chinese spy – and to demand an immediate halt to exports of advanced artificial intelligence chips to China.

Lawmakers from both parties have become more outspoken in their calls for tougher legislation to prevent China from accessing advanced US chip and AI technologies. The Senate version of a defense policy bill includes authorizing Congress to review licenses to sell advanced AI chips to China, authorizing the Commerce Department to track AI chips to ensure they aren’t diverted to unauthorized regions, and compelling US allies to match US restrictions on exports to Chinese chipmakers.

Beijing has warned the US against using the episode as a reason to impose new restrictions, with Chinese Foreign Ministry spokesperson Mao Ning telling reporters on Thursday: “The US should stop fabricating the Chinese spy’ narratives as a pretext for imposing technology restrictions.”

Beijing has refuted claims she was a Chinese spy and called the allegation “unsubstantiated.”

Trump doe s not plan to confront Xi on the Nvidia issue, according to senior U.S. officials who briefed reporters Friday on the condition of anonymity under ground rules set by the White House. The officials also said they do not expect Chinese retaliation if they close loopholes to existing measures that prohibit China from smuggling or using advanced computer chips.

Huang has been a frequent visitor to the White House, and in May, he jumped onto Air Force One in Alaska, joining Trump at the last minute for a state visit to Beijing, where he captivated locals by sampling street food. He and his wife, Lori, were seated at the head table with the two leaders when Trump hosted Xi in September in Washington. At a tech summit that month, Huang took a phone call from the president while he was in a live appearance.

Meanwhile, the US and China have committed to the idea of a hotline for AI national security-related incidents.

Kyle Chan, a fellow at the Washington-based think tank Brookings Institution, said the Nvidia scandal – and the possibility of new US export control measures – could throw a wrench in the AI talks. “The question is whether Beijing can separate export controls from the AI safety discussion or will view them as connected issues,” Chan said.

Increasingly, experts say, China is emerging as an AI counterweight to the U.S. and closing the gap in its lead on the technology. But advanced chips and other technology from Nvidia are still crucial for many Chinese AI companies and research, analysts say.

Chinese chipmakers, including Huawei, have been making rapid progress to narrow the gap by finding ways to work around the US restrictions, including by clustering large numbers of less advanced domestic chips. But Nvidia’s cutting-edge chips still lead in single-chip capability and outperform Chinese alternatives in training advanced AI models, analysts say.

China’s push for technological self-reliance may have contributed to a reluctance to buy larger amounts of American chips. Despite the U.S. approval to sell some H200 chips to China, Nvidia said earlier this year it had shipped only a small amount to China.

The Huang episode could ultimately add momentum to China’s domestic chip industry, said Rui Ma, founder of Tech Buzz China and a China tech expert.

“For Beijing, the fallout only adds urgency to its efforts to build a domestic semiconductor supply chain. That was already a strategic priority, but if access to Nvidia computing power becomes even more restricted, Chinese companies will have increasingly few alternatives,” Ma said. (AP) RD