Charlie Warzel writes:

Given the obsession over the AI race between the United States and China, you might imagine that news of the man leading the most important company in AI being caught in an extramarital relationship with a woman believed to be a Chinese spy would spark outrage and excoriation without parallel. You could suppose that such reckless behavior, upon discovery, might lead to widespread calls for immediate resignation and for deep investigation—not just of the executive, but the entire company. Pitchforks, et cetera.

It is curious, then, that, as news came out that the Nvidia CEO, Jensen Huang, had had a romantic relationship with a Chinese businesswoman who was also an asset of Beijing’s Ministry of State Security, notable factions of Silicon Valley and Washington, D.C., seemed nonplussed. “Even incredible humans make mistakes,” Bill Ackman, the billionaire hedge-fund manager, posted on X yesterday. “We should all support him and his family. Onward.” The venture capitalist Shaun Maguire offered a five-point analysis of Huang’s situation, noting that the CEO did something “incredibly dumb” and “bad for America,” but that “my guess is there was no bad intention.” He then argued, “I believe Jensen is irreplaceable for America’s AI leadership.” Elon Musk agreed. From there, the posts, written before we know all the facts of the scandal, got only more absurd, including defending Huang’s affair on the grounds that his kids are adults now.

Later in the day, Donald Trump echoed calls for Huang to stay on as CEO. He called Huang “an honorable guy.” The president, who has had extramarital affairs of his own and is credibly accused of sexual crimes by numerous women, sounded unbothered. “I think he probably has an excuse for it,” Trump added. Nvidia’s board of directors seemed equally deferential. It announced an independent investigation into the incident but also stressed that it has “no reason to believe that either national security or NVIDIA secrets were compromised” and that it “has confidence in Jensen and his leadership team.” Huang, for his part, issued a statement yesterday acknowledging the affair and noting that he would cooperate with the investigation.

It’s tempting to see this as little more than powerful men defending their kind—a classic example of bros before pressing technological-geopolitical security imperatives. But that explanation misses both Huang’s and Nvidia’s centrality in American politics and the global financial system. Nvidia’s chips are arguably the most important infrastructure component of the AI boom; without the tech, the OpenAIs and Anthropics of the world would be unable to train or power their models—reporting suggests that billionaires have begged Huang for greater allocations of Nvidia chips. This intense demand has made Nvidia a financial juggernaut; in May, its market capitalization was $5.7 trillion, which made it larger than every economy except that of the U.S. and China.

Last year, my colleague Matteo Wong and I described the U.S. as an Nvidia-state, much like Saudi Arabia is a petrostate. That’s because, in recent years, the company has become one of the biggest investors of other AI companies; As of July, Nvidia announced that its equity investments valued roughly $99 billion, including in companies such as OpenAI, Anthropic, SpaceX, and data-center providers like CoreWeave. It’s a circular style of investment where companies pay Nvidia enormous sums of money for its chips and then Nvidia reinvests some of that money back into those companies and their competitors, in part so that they can continue to buy chips. You could make a strong case that Nvidia helps support big chunks of the Magnificent Seven ecosystem, the tech companies that are responsible for roughly a third of the S&P 500’s current value. According to The Economist, Nvidia stock has produced “15 cents of every dollar the American stock market has returned since 2023.”

Huang, who founded Nvidia in 1993, is the company’s key figure, praised by many in the tech industry as one of the visionaries responsible for the rapid acceleration of artificial intelligence. He’s instrumental in the company’s engineering decisions, its allocation of chips, and other investments. He also has no clear successor. Outside of Silicon Valley, Huang has become a trusted adviser and ally to Trump on AI policy. Huang’s thinking on issues such as AI doomerism (he’s anti-doom) and chip allocation in China (he’s for it—a position that warrants examining, given this weekend’s revelations) influences U.S. policy. This centrality is why one tech analyst on CNBC this morning implied that replacing Huang was a comical suggestion. Huang is a singular figure: the linchpin of the company that is arguably the linchpin of the American economy. Framed another way, Nvidia has much of the financial system in a hostage situation. Huang is too big to fail. Which may be why so many people seem motivated to downplay or protect him right now. [Continue reading…]