Jensen Huang, CEO of NVIDIA, has acknowledged an affair with a woman suspected of being a collaborator with Chinese intelligence. Following this admission, reports from U.S. media indicate that the board is preparing for his dismissal, prompting a sensitive reaction from Japanese media and the stock market.
As major Japanese outlets relay news from the U.S., economic publications are scrutinizing whether advanced artificial intelligence (AI) semiconductors have been funneled to China through third countries and how far NVIDIA has tracked its end users. They warn that Japanese companies could be affected by the fallout. On November 12, shares related to NVIDIA, including Advantest and Ibiden, faced heavy selling on the Tokyo Stock Exchange, leading to a decline in the Nikkei average for the first time in four trading days.
The Nikkei highlighted that the focus of this incident is on the potential circumvention of export controls regarding advanced semiconductors to China and the risk of confidential information leaks. If the investigation confirms such leaks, Huang may face significant pressure regarding his position. Citing the New York Times, it reported that Secretary Marco Rubio directed the drafting of a document warning about the inappropriate relationship earlier this spring. If the administration was aware of this and failed to respond, it could lead to criticism of the Trump administration.
The Asahi Shimbun noted that this scandal extends beyond a personal affair involving a major IT executive, potentially shaking the economic and military-security aspects of the U.S.-China AI rivalry. With President Trump scheduled to visit China next week, there is keen interest in the discussions that may arise regarding AI.
The Yomiuri Shimbun, citing Axios, reported that Howard Lutnick, the Secretary of Commerce, opposed adding the Singapore data center company Megaspeed, associated with Huang's affair, to the export control list, arguing it would escalate the trade war with China. Overall, these three newspapers emphasize that this incident could escalate into a broader issue concerning U.S. semiconductor regulations against China.
However, some analysts caution that increased regulations could ultimately be detrimental to the U.S. Yukawa Tsuraki, a former editor at the Shijitsu Shimbun who has extensively covered Silicon Valley, wrote in ITmedia Business Online that rather than slowing China's AI development, regulations could bolster China's semiconductor industry, causing U.S. companies to lose significant market share and influence. He cited analysis from the Brookings Institution, indicating that prior to 2023, NVIDIA held over 90% of the Chinese AI semiconductor market, but by 2025, Chinese semiconductors are projected to capture about 41% of that market.
Japanese Companies on Alert
Media outlets are paying close attention to the potential impact on Japanese companies. NetIB-News, an economic publication, stated that viewing this incident merely as a case of a CEO falling into a honey trap misses the core issue. The key question is how well NVIDIA has tracked the sales channels and end users of its advanced chips. The publication identified three potential repercussions for Japan:
- First, the semiconductor supply chain. Many Japanese companies supply materials, parts, and equipment to NVIDIA, so a decline in NVIDIA's market valuation could lead to a drop in related Japanese stocks.
- Second, investments in Southeast Asian data centers. If the U.S. mandates tracking chip locations or tightens transaction reviews, local data center operations could be delayed, increasing the burden on Japanese companies supplying cooling and power equipment to verify their clients.
- Third, export controls. If the U.S. demands that allied countries join in restricting semiconductor manufacturing equipment exports to China, Japanese semiconductor equipment manufacturers could face limitations on exports to China.
NetIB-News concluded that in the future, simply selling quality products will not suffice; companies will need to demonstrate their ability to verify who ultimately receives their products to maintain competitiveness.
The scandal involving Huang has also shaken the Tokyo Stock Exchange. On November 12, the Nikkei average initially rose by 465 points, buoyed by strong U.S. semiconductor stocks, but later reversed course as selling pressure on NVIDIA-related stocks continued, leading to a decline in Asian tech stocks. Ultimately, the Nikkei closed down 429.23 points (0.70%) at 60,819.36, marking its first drop in four trading days. Notably, Advantest, a semiconductor inspection equipment firm, fell by 4.6%, dragging the index down by over 313 points, while Ibiden, which manufactures semiconductor packaging substrates, plummeted by 8%. SoftBank Group also experienced a downturn. In contrast, Tokyo Electron saw a slight increase of 0.3%, highlighting the mixed fortunes within the semiconductor sector.
Meanwhile, NVIDIA is set to announce its earnings on November 17. The U.S. House of Representatives has requested Huang to explain the allegations in a closed session on November 18. The extent to which these allegations are substantiated will determine whether this incident concludes as a corporate governance issue or escalates into stricter semiconductor regulations that could burden Japanese companies.
* This article has been translated by AI.
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