Jensen Huang, chief executive officer of Nvidia, stepped down on Thursday after the company's board opened an investigation into his extramarital relationships. The board named Colette Kress, Nvidia's chief financial officer, as interim CEO. The company has not released exhaustive details of the probe.
Huang had been a prominent critic of strict US export controls on advanced chips to China and used personal influence — including ties to Donald Trump — to secure licenses allowing sales of Nvidia H200 and H20 processors to China. His exit removes a significant industry voice opposing tighter restrictions and could make it easier for US lawmakers and the Commerce Department to block Chinese access to advanced computing capabilities.
Anticipated US measures
In Congress, lawmakers aim to fold three broadly supported export-control bills into the year-end defense package: the AI Overwatch Act, the Chip Security Act and the MATCH Act. These proposals have backing from major AI developers, including OpenAI.
Separately, the US Commerce Department is finalizing rules that would prevent Chinese firms from remotely accessing advanced US chips via foreign data centers. Reporting by The Information indicates such restrictions could target data centers in Singapore, Malaysia and Thailand. Analysts say closing these loopholes would significantly reduce the ability of many Chinese AI labs to keep pace with the world's most advanced systems.
Proposals under consideration also include curbs on allied suppliers' access to chip-manufacturing equipment — measures that observers quoted in the article view as likely to gain approval in some form.
Potential Chinese responses and risks to the trade truce
Beijing is likely to retaliate if it views US measures as excessive. Mao Ning, spokesperson for the Chinese Ministry of Foreign Affairs, criticized export controls at a Friday briefing, saying they disrupt global industrial and supply-chain stability.
The trade truce negotiated between Donald Trump and Xi Jinping expires on January 10. Eurasia Group analysts expect Xi to use the upcoming Shenzhen APEC summit and the December G20 meeting in Florida to underscore China’s red lines. If Washington adopts rules that Beijing considers to cross those lines — particularly limits on remote access to foreign compute capacity — the analysts warn the truce could unravel by 2027.
Possible Chinese countermeasures include further restrictions on exports of rare earths, materials critical to US defense and certain technology industries.
Short- and long-term effects on China’s chip and AI sectors
In the short term, tighter US controls would pose serious challenges for Chinese AI developers by cutting off foreign data-center access and curtailing grey-market channels that have supplied advanced chips. The Institute for Progress previously estimated that by 2027 at least 30 percent of China’s advanced AI compute capacity could have come from leased foreign data centers and chip-smuggling routes through Southeast Asia.
Over the longer term, however, such restrictions could accelerate Beijing’s push for a self-sufficient semiconductor industry. Wu Xinbo, director of the Center for American Studies at Fudan University in Shanghai, argued that export controls might ultimately strengthen Chinese companies such as Huawei Technologies by giving them time and incentive to close the technological gap. Tilly Zhang of Gavekal Dragonomics said increased adoption of domestically produced chips could become an irreversible trend.
Chinese firms currently still rely heavily on Nvidia processors to train the most advanced AI models, but domestic chipmakers are steadily narrowing the gap. The article notes that the technology gap between the two countries has narrowed significantly since 2024.
Manufacturing bottlenecks: equipment and lithography
A principal obstacle for China remains access to chip-making equipment. US export controls have already prevented China from obtaining ASML Holding’s extreme ultraviolet (EUV) lithography machines from the Netherlands, which are essential to producing the most advanced semiconductors. As a result, manufacturers such as Semiconductor Manufacturing International remain several technology generations behind global leaders.
Huawei’s Ascend processors also trail Nvidia’s products in performance, reinforcing China’s motivation to develop domestic production and design capabilities.
The Nvidia scandal’s broader geopolitical impact
The scandal surrounding Huang has also implicated Alice Huang, a senior executive at Singapore-based cloud provider Megaspeed, whom US authorities have suspected of spying for China and of facilitating shipments of export-controlled chips to Chinese buyers. These allegations have already begun to curtail the grey-market channels Chinese firms used to obtain advanced hardware.
Shen Dingli, a Shanghai-based expert on international relations, expects Nvidia’s next leader to implement stricter vetting of buyers with potential ties to China, and said the rudimentary smuggling methods used to procure US hardware are likely coming to an end.
Conclusion
Jensen Huang’s Thursday departure introduces a new variable into the US–China technology competition. US policymakers are moving toward closing remote-access and grey-market avenues for advanced chips, steps that would hamper Chinese AI development in the near term but likely spur China’s efforts to build its own semiconductor capabilities over time. If implemented, these measures risk prompting Beijing to retaliate and could threaten the January 10 trade truce between the two countries.
