Jensen Huang is out. What did China want from him?

Today, we’re talking about the Jensen Huang scandal at Nvidia, which is developing so quickly that we had to do an emergency update of this intro minutes before publishing this episode.

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Huang just resigned from his position as CEO of Nvidia as news of his affairs, including with an alleged Chinese spy, threatened to engulf the company.

We’ll have more on that story as things develop and we learn how Nvidia will restructure itself after Jensen — he had something like 60 direct reports, after all, and the entire AI financial ecosystem flows through the company. This is pure Decoder bait.

But just two days ago I talked to Kyle Chan, a foreign policy fellow at the Brookings Institution’s John L. Thornton China Center, about the real heart of the scandal: What would China even seek to accomplish by having a spy so close to Jensen? And what does the real state of the US-China AI conflict really looks like, particularly from the Chinese point of view?

Kyle’s answers about chips and how China is perceiving the so-called AI “race” were very illuminating, but maybe even more interesting was his observation on Jensen Huang’s relationship with Trump was the most important thing of all — because maybe what China most stood to gain was someone who could whisper in the right ears.

Let’s just dive right into it. But keep in mind that when we were talking, we still didn’t know what would happen with Jensen.

Okay: Kyle Chan on Nvidia, China, and the future of AI export controls. Here we go.

This interview has been lightly edited for length and clarity.

Kyle Chan, you are a fellow at the John L. Thornton China Center at the Brookings Institution. Welcome to Decoder.

Great to be here.

What on earth could we be talking about as it relates to your expertise about China today? I have a lot to ask you about Nvidia, about our relationship to China as a country, as an economy, and about national security.

Let’s start at the very beginning. From all the reporting we have today, it seems like the United States government has been very worried about a company called Megaspeed and Alice Huang, the alleged Chinese spy at the center of the swirling scandal around Jensen Huang, the CEO of Nvidia. What do we know about Alice Huang and Megaspeed?

We have to be careful about what we know and what we don’t know. So far, there are allegations that the US intelligence community believes that Alice Huang may be an asset of the Chinese intelligence services. Megaspeed itself is a customer of Nvidia’s and they built a data center in Malaysia.

They also seem to potentially have ties with Chinese companies and could — and this is where we’re getting into what we do know and what we don’t know — potentially be a conduit for Chinese AI companies accessing cutting-edge Nvidia chips like Blackwells.

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I want to rewind way back. The notion that the Chinese AI industry wants Nvidia chips has been floating around for years and the idea that the Chinese AI industry would somehow develop a parallel set of technology or a superior set of technology because of the constraint of not having Nvidia chips has percolated into the discourse several times.

I’m particularly thinking about DeepSeek. DeepSeek launched R1 and it outperformed our models in some ways. We think they didn’t have access to the chips. There are some accusations that they had access to the chips. It turns out they did a bunch of fine-tuning on the chips they did have.

What is that relationship like? Do they need the highest-end Nvidia chips? Is it true that they’re actually developing parallel technologies that might be superior to the chips they can have? Just set that stage.

A lot of the details are murky, and they’re probably murky for a reason. But up until now, we saw Chinese AI companies that were very heavily dependent on Nvidia chips in order to train and run their models. In fact, they became some of the biggest contributors to the CUDA ecosystem, which is Nvidia’s software ecosystem and platform.

They got very good at that, but at the same time with US export controls and greater technology restrictions on access to cutting-edge GPUs, China increasingly pushed these AI companies to switch away from Nvidia to Huawei and other domestic AI chip makers. The idea there is to develop a parallel domestic AI chip supply chain that is good enough, if not on par with, Nvidia’s latest chips, and — crucially — resilient to policy actions coming out of Washington.

So that is the story up until this point. The question is, now, what is that trajectory for the Chinese GPU or AI chip development?

The reason I wanted to start there is that the motivations to get close to Jensen Huang are very murky to me. As the CEO of Nvidia, I understand that everyone thinks he’s the character and he’s actually in the software designing the next generation of Nvidia GPUs, but he’s just traveling the world giving policy speeches.

If you want to build a parallel GPU ecosystem, you’re trying to get close to the designers and the engineers, right? What would be the goal of trying to get close to Jensen Huang?

If you wanted the design specs for the latest Nvidia GPUs, I don’t know if you would ask Jensen directly. I think you might want to go to his technical staff.

He does have like 60 direct reports. Decoder is often a show about org charts and that one has been on top of my list for a long time, but we’ll set that aside for now. Keep going.

What it’s really about is potentially two things. One is trying to understand, maybe to glean information about, the US policymaking process. Jensen Huang is very close to Trump. They talk a lot. Trump can apparently just call Jensen on his cell phone at any moment.

In the middle of a conference. We’ve seen the video.

On the other side, and maybe this is even the bigger issue, perhaps it’s the biggest concern of all, is the concern that the direction of movement could run the other way, which is that somehow through Jensen, China might be able to influence US policymaking, especially on export controls. That is the big worry from a lot of people in Washington.

One of the other underlying concerns here, that I’m just trying to parse out, is that Alice Huang, the alleged Chinese spy, is an executive at a company called Megaspeed. And through Megaspeed, Nvidia may have already been circumventing export controls.

It seems like if you’re already solving the problem, maybe you should just leave it alone. How does that dynamic play out?

A lot of the story is strange. Even seen in the most cynical terms, it doesn’t quite add up. There could be several different possibilities. One is that this is actually not some concerted strategy from Beijing to try to obtain chips or information or influence, but this is potentially Beijing not quite understanding the full situation and wanting to co-op this Alice Huang person and at least try to understand from her standpoint what is happening.

Because I think you’re right. Already you have a very strong relationship between Nvidia and Megaspeed. You also already have — and this is on the influence side — Jensen Huang advocating for his own commercial interests, for a loosening of export controls on his own chips to China. You don’t really need Beijing to push on that gas pedal. That’s already happening.

So there are some things that don’t quite make sense if you’re thinking about it from those standpoints, but if you’re thinking about it from the viewpoint of “Beijing wants visibility,” then perhaps that is another plausible explanation.

Beijing just wants someone who Trump calls on the phone to advocate for their viewpoints. I see all of that, but what are we getting out of it? If the goal is Nvidia chips, it feels like that is already assured. If the goal is Nvidia engineering plans, that feels like a question mark. If the goal is influence over the Trump administration, I feel like they could have just bought cryptocurrency.

[Laughs] That’s right.

There’s a big swirl of what is actually happening here. Maybe your point that Beijing just needed more visibility because it is a swirl is the motivating factor. The question that leads me to is that the New York Times reports that US intelligence agencies first flagged these issues a year ago to the Trump administration. There was a memo from Marco Rubio. The reporting is that he oversaw the memo, which is as much plausible deniability as anything. He oversaw it. He was aware that there was a memo. A year ago, the United States’ national security apparatus was worried about Alice Huang at Megaspeed, her relationship with Jensen, and nothing occurred. What do you make of that?

That is one of the most worrying aspects of all this. Regardless of what the details are and what is known publicly versus what our intelligence community knows, this is something that should be investigated. This is obviously a major national security issue and this is something where you don’t want someone meddling with this process. You want to do a full investigation, get to the bottom of what’s happening.

I think what we’re seeing from some of the reporting is that this has been known, and in fact, if anything, there may have been efforts to try to stop this investigation or distort it in some way. That is very troubling from that internal, within-the-US-government perspective.

There’s a lot going on with Nvidia in that part of the story, where Nvidia’s own spokespeople are saying, “There’s nothing going on here. This is a normal relationship,” on the record to many publications. A week later, Jensen issues his apology letter saying there was a relationship.

That’s not great for John Rizzo, Nvidia’s comms person. Tim Teter, Nvidia’s general counsel, is out there saying everything is above board. Now we know not everything is above board. What do you make of Nvidia’s corporate governance here? Because there’s a whole bunch of shareholder lawsuits to come. There’s one filed as of today. I can only imagine there are more to come.

Nvidia has to tread very carefully here because what you don’t want is exactly what’s already happening, which is to start to deny or dismiss some of these issues and then turn around and have to say, “Actually, there might be something there.”

This is especially important now as there are growing calls for a congressional investigation. So this is going to be separate, perhaps, from within the executive branch where, again, I think we have reasons to worry about conflicts of interest and people not wanting to do this all the way. But if there’s a full-blown congressional investigation, that might reveal some things that, if you are Nvidia, you want to get out in front of rather than have to backpedal later on and explain yourself.

Part of the back and forth here with the government’s concern about Alice Huang and Megaspeed is that the Commerce Department spent months looking at the company and then Teter, the general counsel of Nvidia, emailed them and invoked a direct relationship with the Commerce undersecretary, Jeff Kessler. That got the case kicked to the DOJ where everything stopped.

Trump yesterday said the FBI is investigating — that’s obviously connected to the DOJ. There’s a universe where the Trump administration is trying to make this go away. Nvidia can pressure the Trump administration to make this go away. That reeks of corruption, obviously.

And then you have a very empowered class of Democrats coming into Congress with polling that suggested corruption was one of the top issues in this last election. I don’t see any outcome except those Democrats and an empowered bunch of investigators and an empowered bunch of committee chairs coming after Nvidia as hard as they can.

How should the company think about that? Should they just fire Jensen now to get away from it? Should they put them in front of Congress every day for the next year? How do you think that’s going to play out?

I think, at the most fundamental level, they need to cooperate and comply with calls from Congress to carry out this full investigation. Because up until now, this has all been so murky, and part of the reason why this has been a stop-and-go, even though those of us in the China AI space have been hearing about this for a while.

Companies like Megaspeed, their role in all this, even people like Alice Huang, have been flagged much earlier than this. The fact that this is coming out now, but also that the investigation was stopped and started within the Trump administration, is a big red flag. Ultimately, from Nvidia’s  standpoint, they’re going to have to come clean with whatever Congress now requests. There are going to be a lot of hard questions from Congress, as there should be, that have been building up for some time now.

If you ever looked at Jensen’s approach to chip export controls, he’s been very fiery that chip export controls are stupid. You mentioned earlier that’s in his business interest. It is better for the Chinese AI industry to be dependent on CUDA and dependent on Nvidia chips, because then if we do get into some conflict, maybe you can restrict that access and you’ll set them back. There’s some swirl of argument that he makes that says it’s in the United States’ national security interest to ship as many Nvidia GPUs to China as you can.

Then there are a lot of China hawks who are saying, “Actually, you need to restrain them and keep them years behind. They will not catch up to our bleeding-edge technology. Jensen, you just keep us ahead.” It feels like, out of all of this, the China hawks are going to start winning more fights than they’re losing — arguing that the Chinese government is actively trying to impede our efforts or actively trying to influence our government.

How should people think about that? What framework should we use to evaluate that mass of differing opinions, especially now that there’s a catalyst for some kind of change?

I think that’s the right way to frame up this whole debate. You have, on the one hand, folks who see the US-China AI competition as a critical strategic competition and access to compute is one of the key levers there, and thus US export controls, not only as they stand now, but tightening them further will be critical to maintaining US edge in the most powerful technology of our lives.

Then there are other people who are in the opposite camp who advocate for greater exports of the US AI tech stack writ large, including Nvidia chips and including to China. Up until now, that camp has been led by people like [Commerce Secretary] Howard Lutnick, Jensen Huang, and Trump himself. What’s interesting is the balance of power, in terms of whose arguing gets more weight, has been shifting and will shift in light of this recent controversy.

So here now those who have been advocating for more exports and fewer export controls, some of their arguments have been tainted by this process potentially, regardless of where the investigation goes.

Then there’s a final variable in all this, which is China itself. That’s something that matters a lot in this discussion because in the background, China is doing two things. One, they’re trying to build their own chips and they’re sort of all-in on building a resilient semiconductor supply chain with their own, say, Huawei AI chips that their own AI companies can use. They will never really catch up. It looks highly unlikely, but they could develop good enough chips to replace the Nvidia ones that they have been dependent on for so long.

The second big factor from China is retaliation. And this is one thing that I’m watching very closely. If these greater export controls are placed by the US on not just chips to China, but also on chip-making equipment — the tools required to make the semiconductors themselves — will China use its own export controls, such as restricting rare earth metals, to hit back?

Right. This is in the context of an ongoing trade and tariff war that has rocked the United States’ economy. In many ways, the first thing that Democrats should do when they enter the next Congress is pass a law getting rid of all the Trump tariffs, right? They’re brought into Congress to fix affordability and the tariffs are an affordability problem, and now we’re going to rush into a trade war with China because we might ask the Dutch government to restrict ASML chip making machines.

That seems very fraught to say, “We need to enter into an even more heated AI war with China that might result in the Chinese government placing export controls on the goods that you already find unaffordable.” Do you think that there’s the political will to go through this whole exercise, or is it just to punish Nvidia and Jensen Huang?

In some ways, this is happening against the backdrop of other issues that are probably more top of mind for both voters and for incoming legislators in the Capitol. Things like cost of living, as you point out, tariffs, and trying to investigate the Trump administration more broadly for corruption and other issues. Somewhere in there is also the debate around data centers and AI itself.

So in some ways, I’ll be curious to see how far this goes, the particular Nvidia issue. There is a scenario where a congressional investigation comes and goes, potentially finds no wrongdoing on Jensen Huang’s part, and then this is just folded into the longer debate around export controls. But there’s another world where if there are issues that come up, that could be potentially disruptive, not just for Nvidia and not just for the US-China relationship, but also for the AI boom in the US overall.

Tell me more about China itself. You mentioned that their chips will maybe get good enough. There’s an argument that the models right now, the frontier models we have today, are actually good enough to disrupt the economy. They’re certainly good enough to disrupt the field of mathematics.

You could stop training new models and just let the technology diffuse and you would still disrupt huge swaths of the economy today. We’re nowhere close to that actually happening. I think the AI labs should prove that they can do it with the technology they have today. That’s for another time.

But China doesn’t need to compete at the frontier to gain the productivity advantages and to gain the industrial advantages. The example I keep using is 5G. I was told for a decade that we had to win the race to 5G, otherwise China would do something and no one would ever tell me what the “something” was.

What is the “something” with AI that China will defeat us at that has made this such a critical geopolitical chess match? And is there a point where it will just be good enough for them to achieve that “something”?

The funny thing is that China doesn’t see this AI race as being so much about the frontier per se. They’re really much more focused on diffusing the technology. And they think they can “win” the AI race by just having AI used much more broadly and integrated throughout the economy, especially in areas like manufacturing where they are already the behemoth.

I think when they see the discussion around getting to AGI, certainly from the government standpoint in Beijing, that to them looks like a bubble and a waste of money. Why are you building all that compute for that? What’s interesting to see is the strategy as they’ve been playing it out is one where they’re trying to not fall too far behind the US, but really focus a lot more on trying to get — especially these open source models — out there across the Chinese economy and globally as well. To that extent, on that metric, they seem to be doing well.

That, to me, always has seemed like the real fight. Anthropic and OpenAI are furious that the Chinese companies are constantly distilling their models. They’re trying to build some technology to keep them from distilling their models.

But if you believe in the promise of AI and what it can do to the economy, your emphasis should be on diffusing good enough models, not AGI. Whereas our emphasis due to the way our market works is a bunch of guys who think they’re going to build digital Jesus. Whatever is going to happen, that’s the thing they want. [Anthropic CEO] Dario Amodei has to pretend that he cares about Salesforce, but we know what his real priority is.

How do the United States and China compete in that dynamic, where you have one very managed economy that has set a much more near-term and potentially achievable goal, and then our market system where the incentives of the leading market players have nothing to do with the economic incentives of the rest of us?

There’s even an ideological foundation to all of this because the vision of AGI is one that is so deeply embedded right now in the American AI community and Silicon Valley culture that I think there’s a risk of potential disconnect, not just between the US and China on this issue, but also within the US, between those who are in the labs like Anthropic and those who are outside who are saying, “Why are we building these giant metal boxes in our backyards? We don’t really see the point of this.”

So there’s already that divergence there. Part of it is this longstanding obsession in the American AI imagination with getting to the machine god essentially.

Bringing that all back to the context of Nvidia, Jensen Huang, Alice Huang, and Megaspeed. Megaspeed is a data center provider in Southeast Asia. It’s theoretically their business. They’re building data centers, they’re buying these chips. Shouldn’t market forces just end this?

The United States AI companies want to build data centers. They will pay whatever rates because they have an ideological purpose that is disconnected from capitalism potentially. The Chinese government is just trying to diffuse AI into manufacturing and the United States government would like to hold them back.

Shouldn’t market forces just mean that you sell the chips to the highest bidder and the highest bidder will almost always be an American AI company?

That’s an interesting question, because there is ultimately market demand in China still for these Nvidia chips. And there’s a divergence here between the companies in China who still want access to Nvidia chips and the government who is saying, “No, no, no. Why don’t you try Chinese chips? Why don’t you help us with our Chinese domestic chip development?”

There’s that divergence there. What’s interesting is players like Megaspeed in between could potentially do things like not just allow Chinese AI companies, again, to potentially get access to Nvidia chips, but then the argument some people are making is that those are chips that could have gone to the US AI companies and hyperscalers who are desperate.

That is an argument that’s out there, but fundamentally, I don’t know how much of this is driven by those sheer commercial interests alone or, again, by some of these policy or ideological divides.

Or by the influence of an alleged spy.

Right, exactly.

Because in a pure market environment, I think I know how this goes, but then you obviously have the complicated geopolitical dynamics and then you have this corruption element where both governments are attempting to influence one company at the center of the storm.

What do you think happens if the Nvidia board investigation determines that Jensen acted inappropriately or a shareholder lawsuit imposes massive liability on Nvidia or a congressional investigation?

There’s no way this company comes out of this unscathed, and the options are Jensen steps down or Nvidia’s restrained in some way or export controls go up even higher. Walk us through the probabilities and what you think happens next.

There is a scenario actually where this ends up with not that much happening.

Interesting.

There is a pathway where there is a congressional investigation and they possibly find no wrongdoing or maybe Jensen really didn’t know, as he claims, that this Alice Huang person was a Chinese spy, and that this ends up feeding into the longer standing trajectory of all the export control debates and everything like that. That’s one possibility.

Another possibility, though, is if there is some kind of wrongdoing that’s found, Jensen Huang might have to step down as CEO. He’s not just like a central node, he is like American AI, like the pillar that is holy.

He’s the only one making the dollar. I mean, this is very important.

Yeah, it’s like if you could draw the network diagram of the entire US AI ecosystem, Nvidia would be at the center of that. If you could draw the diagram of the entire Nvidia ecosystem, a single man is standing at the heart of all of that.

The question becomes, if he were no longer the CEO of Nvidia, how much impact would that have on Nvidia’s ability to make progress on its own AI chips and what impact would that have on the rest of the US AI industry? One possibility, for example, is that there is a slowdown in Nvidia’s ability to crank out next generation after next generation of better and better chips. And that could impact US overall compute build out. That is one possibility.

Another possibility is that there’s just so much demand and that the knowledge is diffused enough throughout Nvidia that the company can still continue to make progress at a breakneck pace even without their fearless leader at the top. A lot is unknown.

“Fearless” is the right word, because when I look at Nvidia, again, I don’t think Jensen is designing the chips. I know that there’s a character he wants to play, where he’s in all the meetings and he’s probably taking some risk in chip design that is hard for us to see from the outside.

But what we can see is Jensen’s enormous appetite for risk when it comes to financing neoclouds and investing in frontier AI companies. All of the dollars Nvidia is making flow back out in a circle to the AI ecosystem. It’s unclear to me whether that continues to happen without Jensen specifically being willing to front the risk and show up on CNBC as the face of the risk and say, “Everything’s okay.” What do you think happens then?

His role as not just a technology leader, but as a market maker is really crucial. When he calls out certain companies like certain startups or neoclouds, you can see their stock prices go up. When he says something like, “I don’t know if this quantum thing is going to work out,” you saw the entire industry takes a hit. So that is the weight of his role in the broader ecosystem.

Going forward, without that kind of advocate and this market maker playing this active role, that’s another factor. Beyond the Nvidia chips themselves and the technological role of the company, there is this deeper industry or even sociological function that Jensen plays and that Nvidia plays in this broader AI buildout.

One of the interesting dynamics in all of that is Jensen also doesn’t seem to care very much about AGI. He thinks it’s just software. I’ve heard him say, “This is just software. Everybody calm down. These risks are fake. We don’t need a safety regime, all this stuff.” He’s more aligned with what you’re describing as the Chinese viewpoint, where this is just a tool to accelerate our economy. If he goes, maybe that changes too.

It’s possible. He has been one of the most powerful counterweights to the “let’s go all in on AGI” perspective that you hear from Dario Amodei and Sam Altman, for example. Without his voice in that process, he’s also been a very strong advocate for open source. Again, emphasizing the diffusion rather than the, say, control and restrictions on cutting-edge AI.

I do think if his voice is not there, there would be a pretty big vacuum for folks who would advocate that position or that view. At the same time though, again, beyond the immediate AI industry in the US, I don’t know how much that “race to AGI” argument resonates with the broader US public.

Right now a lot of people are just more wondering about the nuts and bolts of it. Is this technology going to cost me my job tomorrow? Is it actually useful? Is it impacting my university studies? Those are things that maybe are more impactful day-to-day for most ordinary Americans.

It is abundantly clear that Jensen is not a great spokesperson to the average consumer in the United States. He has not made the sale to them. He’s made the sale to a bunch of financiers. He’s made the sale to Wall Street. He’s made the sale to the tech industry.

But the average American, as we can just see from the polling in the election, is very, very skeptical of all of this and very, very skeptical of the costs versus the benefits. Again, I’m just putting that in the context of there’s an alleged Chinese spy whispering in the ear of this man.

What truly would the Chinese government hope to gain from that? Because in one way, they’ve actually achieved a victory here. They’ve destabilized the American AI economy. But it doesn’t seem like that was the goal. They’re furiously denying that any of this even happened.

There is another very counterintuitive take, which is they kind of shot themselves in the foot on this one. From Beijing’s perspective, they don’t want to see more export controls, they might want to see a loosening. But now because of this potential Chinese spy, they’ve tainted the one man who has been advocating the most for loosening export controls. In some ways now, they’ve taken out someone who had otherwise for sheer commercial reasons been more aligned, and who’s going to take that place?

If anything now, it has really charged the Democrats especially, who have been criticizing the Trump administration about not being tougher on these export controls. It has really galvanized the Democrats on this front and made it more of an issue perhaps than it was before.

Yeah, especially when you connect it to corruption and the AI industry wasting money, all this stuff, it’s all there for them. Tell me more broadly about Chinese spying in the AI industry.

There was a report, I don’t know, a few months ago that OpenAI was warning its employees that spies abound, that if suddenly attractive people appeared, be wary because they were probably spies. I love that. There’s just something about that that’s great.

Obviously when it hits Jensen, it’s a different kind of story, especially with the national security implications and corruption implications. Give us a sense of what the spy trade is like on the ground for the average AI researcher.

All I can say here is that they are juicy targets. For the US AI labs, anyone who’s involved with cutting-edge frontier AI,  chip production, and chip design would be juicy targets for Chinese intelligence gathering because this is something where China’s trying to catch up. They’re trying to figure out how to keep pace with the US on AI and try to build their own alternatives to Nvidia GPUs.

You can see there have been other examples of cases where they’ve been poaching engineers from TSMC in Taiwan or from South Korea, and have struggled to deal with efforts to hold back this strategic IP basically. There’s probably a lot more happening under the surface in terms of this cat-and-mouse game, but I do think that they are prime targets.

Correct me if I’m wrong, but I think that there have been warnings from the US government to be careful and to step up your game on the cybersecurity front and the intelligence front to protect against these threats.

Meanwhile, they’re putting all their information into Slack and getting breached on the daily. Who knows if these warnings are taking off.

Onto the last set of questions here — I’m thinking about Apple and Tesla, where we moved our manufacturing to China and we moved our supply chains to China, the Chinese industries.

Whether it was above board or not — and there’s a rich debate you could have on that, we’ve had it on the show — they learned a lot from our companies. There was technology transfer. That’s happening in AI too.

There are a lot of Chinese AI researchers working in and around these labs. There is technology transfer happening, again, above board or not. Isn’t that just the normal course of business or is there something more nefarious happening here?

To some extent there are people flows and knowledge flows. You might not even think of it in terms of national-level AI communities. You might think about this global diffusion of know-how tips and tricks for squeezing a bit more performance out of the same amount of compute. Especially up until recently, you saw a lot of sharing of, say, papers like the transformer paper, that disseminated new architectural breakthroughs throughout the global AI community. And now that’s changing, obviously, as a lot of companies, especially the US companies, are holding this much closer to their chest.

But there is this broader question about who gets access to this. Who gains and loses? I guess it’s also not just a one-way flow. Some of these American AI companies benefit a lot from having some of these Chinese developers work with them. In the same way Apple and Tesla, it wasn’t just like they gave away the crown jewels to China, but that China in turn saved these companies, especially at times when they were facing a perilous moment in their histories.

There’s this bigger question about what the line is between normal commercial and technology flows versus a concerted state-backed effort to obtain sensitive strategic secrets and IP technology that would have broader geopolitical implications.

Does that strategy for China look like a bunch of companies like Megaspeed with allegedly compromised executives, or does it play out more directly?

Actually if anything, it would be less about the companies like Megaspeed, who seem to be middlemen for dealing with compute, and perhaps different companies, different agencies perhaps in the Chinese system, that might be more active.

At one extreme you have the outright concerted efforts at industrial espionage. They’re state-backed actors who are very systematic at trying to obtain some of the best commercial secrets from around the world, including from American companies.

But on the other hand, you do also have this gray zone of, “If a Chinese company acquires a stake in a US or European company, what does that mean? Does that mean they’re trying to obtain the technology or is that a regular commercial deal?” That’s where it starts to get more difficult to parse and you’d have to look at it on a case-by-case basis.

One of the dynamics in talking about the Chinese government and the United States, especially when you talk to American industrialists, is that the American government is chaos and democracy is messy and everyone’s running in 50 different directions, and the Chinese system is directed. They make 100-year plans, not one-quarter plans. We’ve heard it. Everyone knows these cliches.

How true is that? In this case alone, it doesn’t seem like they achieved the goal of their plan. In many cases, they might have actually set themselves back.

Oh, yeah. For those who actually study China, who have done long-term research on this country and who understand it more closely, it looks like a much messier picture than any of these portrayals, especially from those in Silicon Valley who try to juxtapose China against what they find to be this annoyingly messy and unruly democracy.

The Chinese system, both within the government and then across industries and government, is full of conflicting interests, rife with corruption. There are lots of times where you have bureaucratic turf wars that spill out into the open. You have missteps, ones that can backfire profoundly.

You see that all the time. You see the local governments not following what Beijing wants, or following what Beijing wants but in the wrong direction. Sometimes they’re given a signal and they say, “Oh, okay, we got to run that way.” And then Beijing says, “No, no, no, no, no, other way, other way.”

This happens all the time, and to anyone in Silicon Valley who’s trying to make this “neat” argument, all I can say is, go talk to people in China. They can tell you how messy it actually is on the ground.

Kyle, this has been great. What do you think will happen next year? What should people be looking out for?

The biggest thing is a congressional investigation and who’s behind that, what that surface is. And then potentially along with that, these pending bills around export controls and whether those will now get more momentum to pass in Congress, and whether Trump himself, and the White House in general, will try to play a role in either stopping that or giving that a quiet green light.

I suspect we’re going to want to talk to you again as this process plays out. Thank you so much, Kyle, for being on Decoder.

Thank you.

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