Nvidia, the dominant force in artificial intelligence processing, is navigating a significant controversy ahead of its quarterly earnings report, which has already contributed to a slump in its share price. The company, originally known for making chips for video gaming, has become central to the AI boom, also acting as a quasi-banker by providing capital and support to firms using its products. Activist research firm Culper has alleged the US chipmaker maintained substantial exposure to Chinese customers, despite restrictions imposed by the Trump administration last year.
Culper’s report highlighted Megaspeed, a Chinese gaming and cloud computing spin-off, as one of Nvidia’s largest Asian customers, allegedly spending $US4.8 billion in two years. The firm further claimed Megaspeed, based in Singapore, was secretly financed by Chinese e-commerce giant Alibaba via a series of shell companies. This raised concerns that Nvidia might be overly reliant on Chinese sales, counter to its public statements, at a time when preventing Beijing from acquiring advanced AI chips for civilian and military use remains a US priority.
The allegations, combined with other factors, have contributed to a significant downturn, with Nvidia’s stock plunging approximately 20 per cent over the past month. The broader AI sector has also faced scrutiny, with a $US2.3 trillion wipeout in the Nasdaq last Thursday. Alex Pollak, Chief Investment Officer at Loftus Peak, an Australian firm with a substantial Nvidia holding, expressed disappointment, noting a “whiff of espionage” and highlighting key person risk. The internal inquiry and mounting questions about the company’s China relationships and export-control exposure are intensifying uncertainty just days before its critical November 18 earnings report.
