Key Takeaways
- • Short seller Culper Research published a 40-page report on May 13 warning that Nvidia had a "significant China problem," focusing on its relationship with Megaspeed and CEO Jensen Huang's close association with Megaspeed executive Alice Huang.
- • Megaspeed, a Singapore-headquartered firm established in 2023, was one of Nvidia's largest Asian customers, spending $4.8 billion over two years, according to the Culper report.
- • Reports that US intelligence agencies concluded Alice Huang was passing information to Beijing, and that Nvidia has started an internal investigation into her relationship with Jensen Huang, have renewed scrutiny of governance and espionage risk six months later.
- • Loftus Peak, which holds Nvidia as one of the largest positions in its $1.6 billion Global Disruption Fund, says key-person risk has been highlighted and expects a significant share price fall but is unlikely to sell its entire holding.
- • Nvidia shares have fallen about 20 per cent over the past month amid a broader tech sell-off tied to AI valuation and infrastructure spending concerns.
Summary
Nvidia was riding a fresh stock market high when New York-based short-selling firm Culper Research raised concerns about the chipmaker's business in China and its chief executive, Jensen Huang. In a report published on May 13, Culper warned that the world's most valuable company had a "significant China problem," according to the Australian Financial Review. The 40-page report questioned Nvidia's relationship with Megaspeed, a major buyer of its artificial intelligence chips, and pointed to what Culper described as an unusually close relationship between Huang and Alice Huang, a Chinese national and senior executive at Megaspeed.
Megaspeed was established in 2023 after Chinese gaming and cloud computing company 7Road separated its overseas operations and renamed the business. Headquartered in Singapore, it became one of Nvidia's largest customers in Asia, spending $4.8 billion over two years, according to the report. Culper alleged that Megaspeed was funded by Chinese e-commerce company Alibaba through a network of shell companies, questioned whether Nvidia's dependence on Chinese customers exceeded what the company had publicly indicated, and warned that Chinese competitors were catching up. The firm also questioned Nvidia's exposure to Chinese customers despite US restrictions on advanced technology sales to China.
Six months later, the allegations have gained fresh attention following reports about Huang's personal relationship with the executive, and Huang has apologised to his wife, saying he was "deeply sorry," the Financial Review reported. The controversy has intensified after reports that US intelligence agencies had concluded Alice Huang was passing information to Beijing, and that Nvidia has reportedly started an internal investigation into her relationship with Jensen Huang. Alice Huang, a Chinese citizen, previously worked as a television reporter in China before taking up her Megaspeed role. US President Donald Trump has defended Huang, calling him a "fine person" who had "done an amazing job for our country," while billionaire investor Bill Ackman said "even incredible humans make mistakes."
The episode has drawn attention to key-person risk at Nvidia, which is central to the AI boom and has become a financial partner to data centre builders through capital, guarantees and other support. Alex Pollack, Chief Investment Officer of Australian firm Loftus Peak, which first invested in Nvidia in 2016 and holds it as one of the largest positions in its $1.6 billion Global Disruption Fund, said the revelations highlighted the importance of assessing key-person risk where there is no clear succession plan. He said he expected a significant fall in Nvidia's share price but was unlikely to sell the entire holding. Veteran investor John Hempton of Bronte Capital, whose fund does not hold Nvidia but views Culper favourably, defended short sellers and said he had initially considered Culper's allegations far-fetched when they emerged in May.
The controversy comes as investors already question tech valuations and AI infrastructure spending. Following the US midterm elections, concerns about tighter scrutiny of data centre construction and AI development contributed to a sell-off that wiped out trillions of dollars in market value, with the Nasdaq under pressure, according to the Financial Review. Nvidia shares have fallen about 20 per cent over the past month.
Megaspeed was established in 2023 after Chinese gaming and cloud computing company 7Road separated its overseas operations and renamed the business. Headquartered in Singapore, it became one of Nvidia's largest customers in Asia, spending $4.8 billion over two years, according to the report. Culper alleged that Megaspeed was funded by Chinese e-commerce company Alibaba through a network of shell companies, questioned whether Nvidia's dependence on Chinese customers exceeded what the company had publicly indicated, and warned that Chinese competitors were catching up. The firm also questioned Nvidia's exposure to Chinese customers despite US restrictions on advanced technology sales to China.
Six months later, the allegations have gained fresh attention following reports about Huang's personal relationship with the executive, and Huang has apologised to his wife, saying he was "deeply sorry," the Financial Review reported. The controversy has intensified after reports that US intelligence agencies had concluded Alice Huang was passing information to Beijing, and that Nvidia has reportedly started an internal investigation into her relationship with Jensen Huang. Alice Huang, a Chinese citizen, previously worked as a television reporter in China before taking up her Megaspeed role. US President Donald Trump has defended Huang, calling him a "fine person" who had "done an amazing job for our country," while billionaire investor Bill Ackman said "even incredible humans make mistakes."
The episode has drawn attention to key-person risk at Nvidia, which is central to the AI boom and has become a financial partner to data centre builders through capital, guarantees and other support. Alex Pollack, Chief Investment Officer of Australian firm Loftus Peak, which first invested in Nvidia in 2016 and holds it as one of the largest positions in its $1.6 billion Global Disruption Fund, said the revelations highlighted the importance of assessing key-person risk where there is no clear succession plan. He said he expected a significant fall in Nvidia's share price but was unlikely to sell the entire holding. Veteran investor John Hempton of Bronte Capital, whose fund does not hold Nvidia but views Culper favourably, defended short sellers and said he had initially considered Culper's allegations far-fetched when they emerged in May.
The controversy comes as investors already question tech valuations and AI infrastructure spending. Following the US midterm elections, concerns about tighter scrutiny of data centre construction and AI development contributed to a sell-off that wiped out trillions of dollars in market value, with the Nasdaq under pressure, according to the Financial Review. Nvidia shares have fallen about 20 per cent over the past month.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.