The scandal engulfing Nvidia Corp CEO Jensen Huang is bolstering the case for U.S. lawmakers seeking tighter restrictions on China's access to advanced AI chips, just days before President Donald Trump 's planned meeting with Xi Jinping next week.
The U.S. and China are locked in a race to achieve global AI supremacy, with Washington spending years restricting China's access to Nvidia's most advanced chips to slow its technological progress. Huang was among the loudest voices opposing U.S. strict export controls on advanced chips to China, which has irked some China hawks.
The alleged affair with Alice Huang, a Chinese citizen who is not related to him and was reportedly recruited by Chinese intelligence to gather information, has given lawmakers fresh ammunition to push for the inclusion of a series of chip-control measures in this year's National Defense Authorization Act (NDAA).
The bills include the AI Overwatch Act, the Chip Security Act and the MATCH Act – all of which are aimed at limiting the flow of advanced chips to U.S. adversaries, particularly China.
Huang had been "the industry's most effective lobbyist against tighter rules," said David Meale, head of Eurasia Group's China practice and an American diplomat who served as deputy chief of mission at the U.S. embassy in Beijing.
But the scandal has weakened Nvidia's "singular ability to slow the progress of those bills" — which were stalled by pushback from corporates and the White House— and made it "politically harder for negotiators to strip chip provisions out of this year's NDAA," Meale said.
Senate Democratic leader Chuck Schumer on Tuesday called on Congress to pass these bills and urged a full accounting of Trump's defense of Huang. House Select Committee on China Chairman John Moolenaar, R-Mich., also called for inclusion of chip export controls in the annual defense policy bill.
Trump's weakened grip over congressional Republicans following the midterm defeat has also made it harder for the Trump administration to hold back such measures, said Kyle Chan, a China fellow at the Brookings Institution.
The fallout from Jensen Huang's affair threatens to put fresh scrutiny on offshore data-center hubs that provide Chinese customers with access to Nvidia chips restricted for direct export to China.
Alice Huang, whom U.S. intelligence reportedly identified as having been recruited by Chinese intelligence, helped facilitate at least $7.5 billion in Nvidia chip shipments to China, according to The Information.
Short seller firm Culper Research estimated in May that more than 20% of Nvidia's revenue for the year ended July 2025, or about $43.2 billion, came from China through illegal GPU diversion and Southeast Asian intermediaries.
Pressure is building in the White House for Trump to address remote access to restricted chips, and action "now appears likely," said Gabriel Wildau, managing director at political risk consultancy Teneo. Potential escalations include blacklisting Megaspeed and other entities, and introducing rules that close the loophole entirely, he said.
The Commerce Department is finalizing a rule aimed at preventing Chinese AI firms from remotely accessing advanced chips through data centers in other countries, according to The Information . The effort, long opposed by tech firms including Nvidia, has gained renewed momentum following the Nvidia revelations.
More Chinese AI companies have reportedly started searching for Nvidia-powered computing capacity at data centers outside China, while traders and intermediaries are ramping up stockpiles of these processors, on the prospect of tougher U.S. enforcement.
If legislation like the Remote Access Security Act – passed by the House in January – goes through next year, it would increase compliance exposure for non-China-based cloud and data-center operators, including those in Southeast Asia, serving Chinese customers, Meale said.
The renewed push for tighter chip control comes days before Trump is expected to meet with Chinese President Xi Jinping on the sidelines of the Asia-Pacific Economic Cooperation (APEC) leaders' summit in Shenzhen on Nov 18-19.
Despite the political firestorm in Washington over the spying allegation, Trump appears "unconcerned" —at least for now, said Wildau. Trump and Xi are expected to keep steering ties toward extending the truce beyond January, he said.
Treasury Secretary Scott Bessent, who is set to travel to China for the summit next week, said Tuesday that he wants to "build a constructive relationship on the basis of balance and reciprocity."
But risks remain that the latest developments could create fresh friction with Beijing. Paul Triolo, a partner at DGA-Albright Stonebridge Group, pointed to the MATCH Act, which would pressure Japan and the Netherlands to tighten curbs on chipmaking tools already in China, as a threat to the Busan truce.
"Chinese officials have been clear that they will respond to the passage of this legislation, and could ratchet up controls on rare earths and magnets that would be very damaging to U.S. industry," he said.
It remains unclear whether Huang, who had a prominent role during Trump's visit to Beijing in May and Xi's Washington trip in September, will join next week's delegation. Asked on Sunday whether he would take Huang, Trump said, "I don't know, but I'd certainly take him."
