2 scandals, 1 destination—Why Nvidia can’t shake China smuggling allegations - Fortune

The dual scandals, both allegedly running through Southeast Asia, have blasted a data-center sized hole through Jensen Huang’s credibility. The first case, in which $2.5 billion in computer servers equipped with Nvidia chips are under scrutiny, involves Supermicro, a company led by a longtime friend of Jensen Huang’s and one of Nvidia’s closest partners.

More recently, a separate string of reports has revealed that Nvidia’s largest Southeast Asian customer, Megaspeed, is under U.S. investigation for chip diversion. There is no evidence so far that the two cases are directly connected, though some industry observers have pointed to potential areas of overlap.

On Sunday, Huang told employees in an email he had betrayed his wife and family in an extramarital affair. His confession followed reports claiming that intelligence officials believe Huang’s affair partner, Alice Huang (no relation), was recruited by China’s Ministry of State Security to purportedly report on his doings to Beijing.

Alice Huang is a former executive of Megaspeed International, a Singapore company that reportedly became Nvidia’s largest chip buyer in Southeast Asia. Alongside Huang’s admission, Nvidia’s board announced it has opened an independent investigation into whether Nvidia co-founder Huang was the target of a foreign intelligence operation.

Nvidia board members have retained acting U.S. Attorney of the Southern District of New York Joon H. Kim and his firm Wachtell, Lipton, Rosen & Katz to run point on the investigation, Nvidia announced Tuesday.

The Supermicro case

Until recently, the most high-profile case of contraband Nvidia chips involved one of Nvidia’s closest partners, a company run by Huang’s longtime friend, Supermicro CEO Charles Liang. Neither Liang nor Supermicro was charged and Supermicro has said it is cooperating with authorities.

In March, federal prosecutors charged Supermicro co-founder Yih-Shyan “Wally” Liaw and two others with routing about $2.5 billion in servers laden with Nvidia H200 and B200 GPUs to China via a Southeast Asian front company. Supermicro was not charged and has said it was a victim of the scheme.

Liang has pleaded not guilty, although one of the three who were charged pleaded guilty last month. Neither Liang nor Liu were named in the indictment. According to Liaw’s indictment, the elaborate scheme involved staging thousands of nonworking dummy servers in three warehouses to trick auditors.

Contractors used hair dryers to soften the adhesive on serial-number labels and peel them off. That alleged scheme followed a similar playbook as one that had ensnared Supermicro in 2006, when the company pleaded guilty to illegally exporting computer equipment to Iran through a distributor in Dubai.

Both routes involved selling to a neighboring country to keep the real buyer hidden. The Liaw indictment does not accuse Nvidia of wrongdoing, but it lays out how the front company’s orders for Supermicro hardware fed into Nvidia’s chip allocation.

The Megaspeed investigation

As details of the Megaspeed scandal emerge, Nvidia’s chips are now at the center of a second major smuggling case—this time involving one of its own customers. Megaspeed reportedly bought more than $4.8 billion worth of Nvidia’s chips during the past two years.

Nearly $2 billion of the chips were installed in data centers in Malaysia and Indonesia that are alleged to serve Chinese customers remotely, according to New York Times reporting. Nvidia, in what could become a grave misstep, repeatedly assured the public that Megaspeed was credible.

In October 2025, a spokesperson said Nvidia had visited Megaspeed operations and found no evidence of chip diversion. Last month, as reports about suspected Chinese spying emerged, Nvidia said the diversion allegations against Megaspeed had been “thoroughly investigated and debunked.”

Jensen Huang, in a statement that has depreciated faster than an older-generation GPU, told Bloomberg his interactions with Alice Huang were “completely normal and not unusual.”

Culper Research, which has shorted Nvidia, argued there were connections between the Supermicro indictment, alleged Nvidia chip smuggling, and Megaspeed. The report called the reported Supermicro-OBON smuggling route one of many that Nvidia chips travel before they get to China.

Political pressure mounts

How things will shake out for Nvidia is evolving in real time, but it’s likely that a terse letter Sen. Elizabeth Warren (D-Mass.) sent to Nvidia in June will turn into a subpoena. That’s thanks to midterm election results that saw Democrats regain the Senate with Warren poised to chair the powerful Senate Banking Committee in January.

Warren and Sen. Jim Banks (R-Ind.) called Monday for Nvidia to answer questions, and three House committee chairs have asked Huang to accede to a closed-door grilling before lawmakers November 18, the day after Nvidia is scheduled to report its third quarter financial results.

The June letter, which went to Nvidia general counsel Tim Teter and audit committee chair Brooke Seawell, sought answers from Nvidia regarding the state of its compliance program and noted that Nvidia continued to include Supermicro Computer as a key partner in its network.

The letter also cited Culper Research, a short seller who bet against Nvidia and published a report that alleges possible smuggling links between Supermicro, Nvidia, and Megaspeed, the company where Alice Huang was a top executive. U.S. authorities have investigated whether the billions in Nvidia hardware Megaspeed bought through Nvidia’s server partners went to Chinese firms barred from getting the chips.

Megaspeed has denied wrongdoing. Huang next faces analysts on Nov. 17, when Nvidia reports third quarter earnings. The following day, House lawmakers have asked for a closed-door briefing. And in January, Warren is expected to wield the subpoena power of the Banking Committee and get the answers she originally sought back in June.