If you’re selling your goods into the marketplace, you’re trading with the whole world. The previous truth requires mention as the economically challenged at the New York Times and CNBC claim Nvidia was diverting or smuggling restricted Nvidia AI chips to China in violation of export controls.
The analysis indicts the economic knowledge of reporters today, not Nvidia. But we’re getting ahead of ourselves.
Traveling back in time, it’s easily forgotten that "Arab oil" continued to flow into the United States after the 1973 embargo of the U.S. by Arab members of OPEC. Though they diverted their oil away from the U.S., those they sold to subsequently sold into the U.S.
Traveling further back in time, during World War I U.S. exports to Scandinavian countries surged. On its face the upswing in trade was odd, but not in consideration of the U.S.’s trade embargo with Germany. It’s a quick way of saying that trade between producers in the U.S. and Germany continued, albeit through intermediaries.
There’s no accounting for the final destination of any good. While businesses can choose whom to sell to, they can’t choose whom their customers sell to.
What’s been said requires consideration as various media find “scandal” in Nvidia chips sometimes finding their way to China, all despite export controls foisted on U.S. producers of AI chips. See above. Yet there’s more.
To see why, readers need only Google the market capitalization of Nvidia: a shade above $5 trillion. Yes, Nvidia is the most valuable corporation in the world. Short of Nvidia ceasing to sell its AI chips altogether, there’s quite simply no way to keep its products out of countries deemed enemies by the U.S. foreign policy establishment.
Production as valuable as Nvidia’s is going to find its way around export controls regardless of Nvidia’s efforts to comply with the controls. It’s basic economics. See this opinion piece’s opening for clarity: If you’re selling your goods into the marketplace, you’re trading with the whole world. About this, Apple instructs.
Apple can presently claim a roughly 11% market share for the mobile phone market in Iran. Apple prospers there even though the U.S. has maintained a trade and investment embargo against Iran for 31 years. In the “closed economy” that is the world economy, embargoes are wholly symbolic.
The New York Times also reports that Jensen Huang has maintained a tight relationship with a “top executive at the Singapore-based data center and cloud partner Megaspeed International,” and this Megaspeed executive might be a Chinese “intelligence asset.” And the scandal is?
So much of what CEOs do is ceremonial, including visiting with and maintaining close ties with customers around the world. As anyone who has ever closed a sale (or tried to) knows and will attest, having the CEO in sales meetings is often the best way to close a deal. That would particularly be true for Huang in consideration not just of his genius, but his gregarious personality.
That Chinese officialdom might try to recruit those known to interact with the CEO of the most successful U.S. corporation in the world (Chinese officials deny it) isn’t scandalous as much as it’s a statement of the obvious. Industrial espionage is as old as business is.
Based on the information of the moment, Nvidia and Jensen Huang are ensnared in a “scandal” not of their doing, but rooted in Nvidia doing business and enlisting their charismatic CEO in the process of doing business. Which means the scandal has nothing to with Nvidia, and everything to do with the economic confusion of those who report on U.S. commerce.
