All right, everybody. We're laughing it up here. It's the All-In podcast. Apparently, slow news weeks continue once again. We struggle to put together a docket, but we're going to try to get something together here. Sachs, I don't know what's in the news. Maybe you have a Sacks Corner for us. Any new hotness drop in the Sacks world or no?
Yeah, Ben rolled out a new reporting feature. Top of material.
That is top of... You're right. You're right. And Friedberg, of course, is here cackling. He's in a good mood. But I understand you almost died in the last week. Where were you? In the hospital. You had the flu.
I got pneumonia. Not good. Very bad. Very bad. I do not wish it upon anyone.
Knocked out in the hospital. Everyone, stay safe.
All right. Well, I saw everybody with their social media well-wishing you. And of course, Chamath Palihapitiya is here. And it's a deep pull for Chamath today. A deep pull from the closet. My lord, I haven't seen that sweater since Biden was in office.
It's a nice ribbed cashmere mock turtleneck.
Okay. Ribbed for Chamath's pleasure.
Ribbed for Chamath's pleasure.
I thought it was supposed to be ribbed for her pleasure.
But it's Chamath. It's all for Chamath's pleasure.
It's always for his pleasure.
Absolutely. That's who he is. All right. Listen. Jensen is out as Nvidia's CEO after an insane series of events that happened in the past week. All of this played out in just six days starting Friday, November 6th, and obviously recorded on Thursdays, which would be November 12th. Here's where things stand as of the taping of this episode. Nvidia's CFO will serve as the interim CEO. The board's looking for a new chief executive. Nvidia reports earnings next Tuesday, a critical moment for the company, and the stock has been crushed, down 15% in the last week, which is hundreds of billions of dollars.
Here's the timeline that led to Jensen's ouster. Last Friday, November 6, right after the midterms, interesting timing, the New York Times published a report claiming a Chinese businesswoman who had a close relationship with Jensen was actually a CCP spy, a Chinese Communist Party spy. The woman is named Alice Wang. No relation to Jensen. They just happen to share the same last name. We'll call her Alice for the rest of this discussion. She's an executive at a Singapore-based company called MegaSpeed. They build data centers in Asia. They rent compute to companies including Chinese ones like Alibaba. According to the reporting, their relationship, Jensen's and Alice's, helped facilitate $7.5 billion in chips to Chinese companies since 2023. The New York Times article was based on a leaked intelligence memo that identified Alice as a Chinese spy. No one knows who leaked it. On Sunday, November 8th, Jensen sent a companywide email admitting he had an affair and that the board would be investigating. On Wednesday, the New York Times reported Jensen had a second affair with a direct report. There's reports of a third potential affair. Let's put all that aside and focus on his resignation, which came after 33 years as CEO.
Important caveat: this story has been hiding in plain sight for well over a year. The New York Times first mentioned Alice's relationship with Jensen back in October 2025, not this October 2026, 13 months ago. They published a follow-up last month: 'Nvidia chief seen as target of Chinese spy plot.' Culper Research, spelled C-U-L-P-E-R, is a hedge fund that put a short on Nvidia according to their tweet storm six months ago. They published their thesis, which was based on Nvidia understating its reliance on China for chip sales. They even mentioned MegaSpeed by name in that tweet storm, which you can see on the screen right here. This is a disaster for the White House. There are reports of finger-pointing as officials try to figure out why MegaSpeed was left off the export control list after these New York Times articles. And we'll get into more export control issues later. Okay, Sachs, we're dealing with partial information here. This is a breaking news story. Caveat, caveat, disclaimer, disclaimer. But let me ask you a simple question. Given the New York Times reporting, what's your take on what they've released to date?
First of all, let me just say that I think this is a tragic situation. Okay, it's tragic for Jensen and his family and for Nvidia and its employees. And I would say it's tragic for the United States of America because Jensen is one of the key reasons why we have a major advantage in AI accelerator chips and GPUs, and that in turn is one of our key advantages in the AI or superintelligence race. In fact, Jensen made such a good chip that many people in Washington wanted to export control that. I think people kind of forget Jensen's been working on GPUs for over three decades and he believed in this technology and this architecture when everyone else was making CPUs, and his company almost went out of business multiple times. It was his vision that created the GPU, which ended up being the key chip that's used in AI. And it's the fact that Nvidia is so far ahead of everybody else that is what gives the United States a key advantage in this thing we call the AI or superintelligence race. So I think this is a tragic situation, and I think that what's happened here is, I mean, clearly it's not a great situation for all the individuals involved. I don't think this redounds to the benefit of the United States either. And it's very unfortunate that this whole situation could not have been resolved in a different way.
Now, let's talk about the story that's come out. I think it's pretty clear that there were two ops here. So, one op is whatever Alice Wang was doing with or without the Chinese Communist Party. There may have been smuggling involved. We don't know. There is an investigation going on and there should be an investigation. We should get all the facts there. We've talked on this podcast about how we do not believe that leading-edge chips should go to China, and if there's any smuggling going on, that is wrong and it should be stopped and the government should crack down on that. So that investigation should continue. We should get all the facts there and we should find out what actually happened. So that is one op, is whatever Alice Wang was doing, again, with or without the CCP. But however, there's also a second op here. And that second op began when somebody or multiple people leaked a highly classified memo or the contents of it to the New York Times. I think it's really important to understand that that's a crime. I mean, leaking classified intelligence is a crime, and many people have been prosecuted for it. In fact, we've had multiple former presidents and current presidents, President Trump and President Biden, their homes were raided because supposedly they had classified documents in their possession. Remember that there was a raid on Mar-a-Lago. There was a raid on Joe Biden's garage and they found the box got caught. This happens to everybody, it seems. Well, I don't know if it happens to everybody, but it's a serious crime. And, you know, because of that fact, I don't believe that the New York Times just got this by overhearing people talking about it at a bar. Somebody made the calculated decision that they're willing to risk going to jail, they're willing to risk committing a crime to let the New York Times know about this story. And so I have a series of questions about that. So, number one is first, who did that and why? What was their motivation? Why did they feel so strongly about taking Jensen down? That had to be at least a part of their motive, that they're willing to break the law. And I do think it makes sense for there to be an investigation opened into this leak, as there have been with many other classified leaks. I don't know why there hasn't been an investigation opened, as far as we know, into this. So that would be question number one, is why this leak.
And the New York Times has given a clue there. Obviously, Rubio was leading this investigation, briefed President Trump on it, and the New York Times attributed the story, the spy part of the story, anonymously to, quote, 'people briefed on the surveillance.' I'll leave.
Yes. But just let's be very clear here. I don't really like you using Marco Rubio's name there, but because he's national security adviser, if there was a classified memo, then obviously it would be done under his supervision as the head of the...
Yeah, I'm not insinuating he's the leak, but it's somebody he...
Okay. When the New York Times says 'people briefed on the matter,' that is an extremely vague and broad terminology. And it could be very low-level officials who did this. And when the New York Times even uses the word 'official,' that doesn't mean they're a senior person in an administration. They could be very, very low-level. And it could also be the case that they're career, which is to say non-political appointees, that just because they're serving in the executive branch of the Trump administration doesn't mean that they are Trump officials. So look, we don't know who committed the leak. All we know is they committed a crime. And I do think that we should be asking the question, who did that and why? Okay, so that's sort of bucket number one of questions. Bucket number two is around the failure to give the defensive briefing. If the national security state is worried that Jensen is in possession of national security secrets and might leak them to someone who they suspect is a spy, why wouldn't you go to him right away and tell him, 'Hey, you have this problem. Don't talk to this person.' Apparently, that didn't happen. And it does sound like that is some sort of standard operating procedure. Let me give you an example. So, we have the case of Eric Swalwell. Okay, so Eric Swalwell was a congressman. He was on the House Intelligence Committee. It eventually came out, and I believe it was the finding of an investigation, that he had a personal relationship with a Chinese spy.
Yes. The New York Post memorably memorialized this with this cover called 'Fang Fang Bang Bang.' You know, it was this story that came out. What was the Democrats' reaction to that? They gave him a defensive briefing. He said he cut off the relationship, and they allowed him to stay in Congress. He certainly did not have to resign, and in fact he didn't even resign from the intelligence committee. So they allowed him to keep not only his seat in Congress but his seat on the intelligence committee. So obviously in this, I'd say, very high-profile example, people did not think it was necessary to resign. They thought that what was necessary to do is to let the person know, allow them to cut off contact, and then you'd be able to move on from there. So, this situation was handled very differently.
Okay, that brings me to question number three, which is what exactly were the national security secrets that Jensen supposedly knew? He doesn't work for the government. He's not, as far as I'm aware, privy to classified materials. So, what is it that people say that he leaked to this suspected intelligence asset? That's never been explained. I just have that question. What I can say is that, you know, as a CEO of a Silicon Valley technology company, Silicon Valley tech companies are very open about their plans or product development plans, things like that. Is there IP that the CCP would like to get a hold of? I'm sure. But to be blunt, it's not the type of IP that you're going to convey over pillow talk. It would be things like files that would allow you to tape out the next generation of chips. That's the kind of thing where, frankly, if the Ministry of State Security or whoever is spying for the Chinese wanted to get a hold of that stuff, I think you'd much rather have a line engineer who can go into Nvidia, find the relevant files and extract them somehow, maybe on a thumb drive, or you do a cyber attack and you get the files that way. That would make a lot more sense to me as the way to basically get a hold of, you know, let's say, secrets.
Now I see some people saying that, well, Nvidia makes a product that is subject to export controls, therefore that's a national security product, therefore national security secrets. Okay, that is a very broad, misleading handwave over the situation. I can go out and buy a Blackwell chip as an American. None of us are restricted from doing that. Certain foreign countries are restricted from doing that, but we're not. And if we buy a Blackwell chip and run it in our own little server rack, we are not in possession of national security secrets. You cannot reverse engineer the design of a chip by getting a hold of the wafer. It doesn't work that way. You have to get the files.
Those chips can of course help you make cutting-edge LLMs like the ones they've been delivering.
Okay, I understand. But that's not what we're talking about right now. Okay, we're talking... the question that I have is what secrets are we talking about that just supposedly compromised? The last question I have, and then I'll stop, is what is the evidence that this person, Alice Wang, was actually a Chinese spy who worked for the Ministry of State Security? And here's what I think is quite unusual. Just this morning, there was an article that came out in Politico where the incoming chair of the House Intelligence Committee, who's a Democrat, he came out of a classified briefing on this subject and in the hallway, with this fresh in his mind, he came out and said that he's not sure that this person is a Chinese spy. He said she might be a useful idiot. Okay. Well, now what is a useful idiot? A useful idiot is someone who doesn't work for the Chinese government, is not a spy. It's just that maybe somehow they're being taken advantage of.
Okay, so look, I have a set of questions about this. So, let's put this all together. Okay, there's two ops here. There's whatever Alice Wang was doing, that potential smuggling operation, it should be figured out. There's a second op that I think also needs to be investigated and figured out. And the components of that are: one, who leaked this classified material in violation of the law? That's the only crime to date that we even know about. Number two, why wasn't Jensen given a defensive briefing, which is standard operating procedure? It was done with Eric Swalwell. Number three, what secrets is Jensen accused of leaking? What secrets would even be in his possession? And number four, was Alice Wang even a Chinese spy? Because now the incoming chair of the House Intelligence Committee, who's a Democrat, just threw major cold water on that. So, I put all these things together and I would say at this point in time...
I think there's more questions than answers. Yes. And I would like a full accounting of the facts to come out.
I think there's a fifth question though to yours, Sachs, which is why at all and why now? Meaning, like, why did whoever pull the pin on this grenade? What did they see where they felt this had to happen, and then why now?
And the other discrediting affair stories coming out in a coordinated way at the same time, like it all happens at once. What is the motivation?
Probably, and I'm just speculating here, but I'm not the only one who has looked at this. You had China hawks who lost this debate about sending chip technology to China from the United States, and they want to reverse that, and they want to have no chips sent to China, and they also want to put GPS and other ways of tracking these chips and backdooring them in order to turn them off, something that Jensen has been opposed to, something a number of senators have been pro. So there could be a contingent in the White House who are very anti-China who want to see the policy with China change. Friedberg.
Yeah. So that's one, the bigger, longer-term picture which I've mentioned several times. There's kind of two paths for the future, I would argue. One is a path where AI technology is broadly accessible, broadly used, and the value of it is not concentrated and the power of it is not concentrated in the hands of a few and controlled by a few, where open-source AI, distributed data centers that are available and accessible to many gives everyone the ability to use AI to rise up, to progress, to create value, and so on. That is a scary and threatening thing because of how it changes a lot of power structures, economic structures, and so on. Creates a lot of instability in existing social, economic, and political systems.
So the alternative path for the world is one of concentrated power and influence over AI technology. This is where I've had this theory that, like, ultimately data centers will get kind of regulated, but maybe further down the stack here with chips becomes the point of control. But fundamentally, there's a motivation to not lose control and to not let the power structures that exist in the world today get diminished by AI. And so we could argue there's probably a broad set of interests there that start to say, 'Hey, this guy's not aligned. Jensen's not aligned with our view of the world.' Jensen has been a strong advocate for open source. He's been a strong advocate for global access to and utilization of AI technology for the benefit of humanity, not just for the benefit of American citizens. And, you know, those views are counter to perhaps a lot of different interested parties.
And clearly there was knowledge about this woman, about Jensen's other relationships or whatever is coming out that's being used to kind of smear him a long time ago. And, you know, to Chamath's point, this is a moment where it's all kind of coming out at once and in such a way that it almost guaranteed that he would be ousted. And I'll just highlight, like, Jensen being ousted is, you know, you've got to ask the question, what is the fiduciary duty of the board? What do they actually have a responsibility to act on? And the one thing they have a responsibility to act on is if Jensen lied. Obviously, if he committed espionage or did something that violated... right? Yeah. So, if there's something criminal, violation of federal law, that is obviously, you know, they have to act on that. You have to terminate him. And clearly because there wasn't an arrest or something like that, it doesn't seem like that's...
I think we can take that off the table, right?
So perhaps the next likely thing is that he actually made a misrepresentation about something. So, you know, companies have what's called a code of conduct. In the code of conduct, it says you have to report relationships. You have to report relationships with subordinates. You cannot have a personal conflict of interest with a customer or a partner, a key business partner, without reporting it. And executives or Section 16 officers at public companies have to make quarterly attestations that they are, in an auditable way, not in violation of code of conduct, that things are auditable.
And that attestation might be what gets him in trouble ultimately, where he made attestations that said, 'I am not violating any of our code of conduct. I am not in violation of any of our business practices,' which would include not having conflicting personal relationships with customers or partners. That may be what gets him tripped up. So, fundamentally, I think the board action isn't related necessarily to the personal relationships, but there's something else that's going on here that ultimately he probably looked at and said, 'Hey, you know, we should probably fast-track through this.' And it is extraordinarily sad and disappointing. This is a man who worked at Denny's and in 1993 started a chip company that no one believed in, that everyone thought was a feature, not a platform, not a product, not much of a business. And the stock price was, you know, pennies compared to the price today. It was less than $2 a share 10 years ago. 100x. They were making video game cards and servicing the Bitcoin.
From 2006 to 2016, the stock price did not move. 10 years of just being a nothing company with a $12 billion market cap. Think about that. You start this company in '93...
...and in 2006 it's worth 10, 12 billion bucks and it doesn't move for 10 years and you're grinding and you're grinding and this is your whole life, your whole business, everything. And you believe and you see this vision and you just keep going and you compound and you build a moat and you compound and you build a moat and you compound and you get an amazingly talented team and all of a sudden four years ago this thing starts to take off and it 20x's in the last four years and is the most valuable company on earth delivering the most profitable quarter in business history, $63 billion in operating profit, more than any other company ever, and then all of a sudden, boom, he gets taken out. I mean, you know, it is disheartening and I think that obviously there's something that was done wrong and we're going to find out and I'm not going to rush to judgment. I'm not going to rush to diminish whatever he did that was wrong. But there's a sad arc to this whole story and there's something very fundamental, I think, to the power structure that is being rewritten in the world today with AI to the story.
Okay, Chamath, let me ask you: Cui bono? Who benefits and who is harmed by Jensen being taken out of that seat? Let's assume he's not a traitor. I find that absurd and insane based on just what we've seen over these past couple decades and his effort and his character. Okay, he's got some personal things going on, but who is the beneficiary of Jensen being removed as CEO? Who benefits from that?
Let me just pile on first before I give you my thoughts. I also think he's an incredible individual and CEO and he's built the industry that will reshape our entire lives, our children's lives, and our children's children's lives. I think in a decade or two when you see solutions to diseases and cancers and we have this abundance that we were told is coming, he will have been as instrumental as anyone, if not more than anybody. Okay. So that's the tragedy of what happened, is a person that was an architect of something this grand was defenestrated this unceremoniously.
Very tactically, I think Friedberg really nailed it around what probably happened at the board level that led to his resignation. When you are an officer of a company and when you file your 10-Ks, every quarter you have to get on the phone with your auditor and you have to go through these sets of questions that they ask you, and they ask you these exact things. You know, do you have a conflict with someone? Are you in a relationship with someone, etc., etc. Now, why do those things happen? The SEC requires that to make sure that you're not running afoul of any conflict of interest so that your company is a reliable steward of capital on behalf of the shareholders. But even more tactically, you need that for things like D&O insurance, which is the director and officer insurance, which is what gives a wrapper of liability for board members and for officers to do the job of running public companies. And there are covenants associated with all of these things. And so when you get into a situation where you may have misrepresented something and you start to breach covenants, those are the actual dominoes that tip. It may not be nearly as salacious as what people want to believe is happening at the board, but those are the tactics of the boardroom discussions. They're extremely tactical, sadly, which is again why it's even more tragic when you compare that to, you know, what he is, which is this giant.
Okay. So who benefits, Jason? I think there's a lot of people that have rushed to this conclusion that China wins, and I would just try to unpack that and ask the question, is that true? So let's take two cases, and these are both hypothetical to sort of try to answer this question. Let's say that there are no chips going to China. Well, why does China win? No chips were going before. No chips are going to go now. China is stuck in the same place that they were before, which is they need an endemic solution that can replace the compute capability of Nvidia. Even without Jensen there, there's still years and years and years, maybe potentially decades and hundreds of thousands of man-hours of work that Nvidia has put into building the moat that they built that doesn't get overcome just because he's not there anymore. So maybe China can catch up, but I still think that that's a multi-year, potentially multi-decade endeavor.
Now, let's assume the other side, hypothetically. Let's say that the chips were somehow leaking into the hands of the Chinese. Maybe not into China, but into the hands of the Chinese. Well, it looks like the government's going to crack down and figure out where every chip went. And so presumably now they're not getting the chips. So whatever they were doing, they're now going to be held back, which is to say that whatever progress they were making has gotten taken away. So that's a disadvantage to China. So as I think about it, in both scenarios, China is sort of where they were or worse off. So I don't think that they benefit.
What about Nvidia's competitors? Does this help AMD or Google or startups, Cerebras or Etched or whomever? And my answer there is again, not really. Why? Because those companies need something very different, which is they need to spend an enormous amount of time still making their chips work at scale and then convincing folks like TSMC and others, Samsung, to give them manufacturing capacity, HBM capacity, etc. And as we've learned the hard way, you can't just will your way to a training run of a million GPUs that just works. This has again been many, many hours of work. So they don't necessarily benefit in the short term. They still have a lot of work that they have to do.
The only cohort of people that I think has the potential to win are those that want some version of what Friedberg said, which is a more centralized governance infrastructure of compute capacity. And very narrowly what I would say is, right now when you export chips, what they ask of the exporter is have telemetry, right? We need to know when and how the chips are being used and we need to have a remote kill switch. But that is a private responsibility that's born through the regulatory infrastructure. Amazon has to have that, Microsoft has to have that, Google has to have that. There is a version of this where now if we think that it's been leaking and there hasn't been enough checks and balances, there is an opening for certain individuals in the government to propose telemetry and a kill switch that is owned by them. Now narrowly they would win now in this scenario because if they were looking for control before, they've now been given an opening to ask for the legislation to get it.
So, I'm kind of at a loss. I don't think that the takes right now that I've seen on X really track for me. I think this is the one narrow take that I believe where there's a clear advantage. Everybody else just still has an enormous amount of work to do. It has not changed their homework. Jason, what's your take on all of this?
Yeah, so I've been thinking about it from two vectors. The first is, you know, who should make the decision that Jensen's out? Obviously, I think it's the shareholders. And if you look at the investigation, it's not complete. I think they should have waited till it's complete and the press and the mobs and all of this shouldn't make too much of an impact on that. He did agree to resign himself, obviously under a lot of pressure. There is something about governance here that we need to consider, which is the people who are on the board who are making this decision are doing it from a CYA position, cover their butts, and they're not doing it, I think, in the best interest of the shareholders, and they don't own a meaningful percentage of the shares. So I think this should be put to a shareholder vote if what we're seeing here is not Jensen doing something criminal. And it still hasn't been proven, as you pointed out, Sachs, who this person was and what their motivation was. Are they a spy or are they just somebody trying to make money? It's unclear to me, or at least from what the data we've seen, what's going on there.
Now on the question that we've been discussing of who benefits from this, and it's really who benefits from America's champion in superintelligence, you know, getting ankled, because this could have a lot of impact on Nvidia and then America's lead. And so the partners, the employees, the shareholders, they're all losers here. So who's the leaker of this document? It can't be the competitors, it's not the shareholders, obviously. I don't think it's China. And then that leaves, I think, maybe the people who are the D.C. elites here, and that also seems a bit farcical that Anthropic or the D.C. elites would try to consolidate power on this because they need the chips as well. And I think that's where I think my personal opinion that there's something going on in the White House, in the administration, between warring factions of who wants China to get no chips, the China hawks, and maybe the people who want to maybe cool off the relationship with China and make it more productive. I think at the end of the day, we're going to find the leak is coming from within the House. That's my belief. There's also a chance it could be a Democrat who is a D.C. elite who wants to damage the White House just completely because why did they not inform Jensen? To Hillary Clinton's point, maybe it's just somebody on the Democratic side who wants to cause chaos. I'm speculating here in a massive way.
Just taking a broader view on the role that Nvidia is playing currently, it may not just be about chips to China, but it may actually be about slowing down the U.S. AI economy because remember...
Nvidia is actually providing capital and guarantees to startups, to data centers, to a lot of infrastructure. A lot of that is directed directly by Jensen. I mean, Chamath, you're pretty close to this, but if Jensen's out of the picture, is there someone in Nvidia that continues running that effort? That's potentially hundreds of billions of dollars of capital that gets turned off that's flowing to the AI economy.
Look, I mean, I think Colette Kress and the head of M&A and Corp Dev, Vishal Bajani, these guys are really smart, good guys. But you are kind of right. The Bank of Nvidia ran through Jensen and it's not clear what happens now. I mean, is the bank closed indefinitely? Is it closed for some period of time and it restarts? Will the new CEO feel the latitude to invest as aggressively? I think Jensen had a much more holistic view of the industry and so he knew how to sort of move the chips around on the board and he had the moral authority to make investments and to make acquisitions that will probably be harder for a more traditional CEO who will have to have committees and analyses and a level of diligence that will just slow things down at best.
Totally. And he has a sense for it. He intuits the whole thing. He knows the market. He knows where things are going. He knows the people personally. With him out of the picture, and he's lived it, so he has mastery. He's like the beating heart of the AI economy and all of a sudden...
I think it's beyond obvious. You ask the question, who benefits? It's China. China benefits from this because Jensen is a tentpole of our entire AI ecosystem. I mean, that's the bottom line. Now, do I think that China leaked this and took Jensen down? Well, I think we know the answer to that is no, because the New York Times has described its sources as people who got briefed on this intelligence. So they're either in the government or one degree away from it. So again, the approximate cause of the leak here was this classified memo. So the rational thing would be that China did take him down. But I think we know that this was domestic and it comes down to the fact that Jensen made powerful enemies either as a result of his policies or because of his company's success, and some of those people eventually took him down.
But you're saying Jensen made enemies of certain people in America.
Guys, this is not in doubt. The New York Times says who they described their source very broadly, but it's people who were briefed on the classified memo. That's not someone from the CCP.
Well, obviously not if that's true.
You asked the question, in whose interest is this? In a narrow sense, obviously Nvidia's competitors; in a broader sense, China. They're the ones who benefit. But look, I don't think we should speculate about that too much. This is one of those areas where we just don't have the facts yet. I think it's an area where, frankly, they should try to get the facts. I mean, again, the only crime that we know was committed for sure in all of this was the leaking of that classified memo. So it would be nice if there was an investigation to find out who did that. But beyond that, I don't think we should speculate.
Just to give you my perspective on the economic impacts of this, I think the unfortunate balance of scenarios now is that I think the risk that we lose 50 basis points to 100 to 150 basis points of growth now needs to be credibly considered. There's a chance here where the investment slows down. I mean, if you thought that we were already going into an economically questionable period because of the Democratic tsunami, right? Meaning you're going to go through a whole legislative framework of slowing down data centers, of slowing down AI, that was already happening. So whatever growth we had that the Trump economy had generated going into the midterms, the odds were that that was already going to be slowed down because of the Democratic legislative headwinds that were coming. And if you layer into that the Bank of Nvidia slowing or stopping and its impact as the critical anchor security around which everybody else kind of pivots, that then further accelerates what the impacts to growth could be. So if I looked at it purely technologically, Sachs, I don't see how China actually benefits from this. In all scenarios, everybody's screwed.
No, no, no, let me explain this. Okay. So...
But economically, I agree with you. Economically, I agree with you. I think people in DC just, or I should just say people who are outside our industry, maybe just see technology in more static terms where they think, okay, the big advantage that the US has is that we have a particular chip, right? But actually the chips are being improved rapidly. There's a new generation of chips that come out every year. We go from Ampere to Hopper to Blackwell to Vera Rubin, and it's that momentum, it's the ability to tape out a brand new chip that's several times more powerful than last year's chip. That's the real advantage. It's Nvidia's competitive advantage and it's America's advantage. So it's the momentum. It's the dynamism. People get way too hung up on some chip that was state-of-the-art four years ago. That's not where the United States has the advantage. It's that we are rapidly iterating and we keep coming up with better and better and more and more powerful chips.
Now, let's take into account what's just happened. Do you think that Nvidia is going to lose a tempo or two? Absolutely. I mean, again, Nvidia's success was based on the ability to tape out a new chip design every year. And Jensen is fundamental to that rapid progress the same way that Elon is fundamental to the rapid progress at SpaceX or Tesla. And if you take him out of the picture, there's just nobody comparable. There's no...
No, no, no. You're right about that. I'm just saying that ankling Nvidia doesn't make somebody else's chips better. Doesn't...
Of course not. But it means that Nvidia's chips will not continue to advance at the same pace.
And this is all about whether China can catch the frontier or not. So for example, look, Huawei has gradually been catching up. They were nowhere in GPUs a few years ago. Then they had the Ascend. Then they rolled out this thing called CloudMatrix where their individual chips were not as powerful as American chips, but they used their prowess in networking to network more of them together. So what they did is they networked 384 chips together in this thing called CloudMatrix to create this rack system. Nvidia networked 72 together, and the NVL72 was better than 384 of the Huawei chips. Nonetheless, they were getting closer and closer. And Jason, to your point, they have energy to spare. So what Huawei has been doing is they create a less powerful individual chip that consumes a lot more energy, and then they network more of them together to get a comparable result at the rack system, and that's how they've been catching up.
Now let's just assume that like Nvidia's crippled for two or three years based on this, right? You get turmoil at the company or whatever. That's really good news for Huawei because they will catch up a lot faster. Obviously, it's good for Nvidia's competitors too. I mean, it's going to be good for AMD and Intel, maybe, but again, that's a very narrow way of looking at it.
I think it mostly will help Huawei if Nvidia is massively slowed down.
Because obviously it's all about staying on the frontier. Tax.
I also think you need to add and view the diminishment of the flow of capital to data centers and to startups that Nvidia provides in totality with the slowdown of data center buildouts because of the efforts made by NIMBYs, and there's a lot of reporting going on on where these NIMBYs are getting funded from to drive local community, state-based, and now federal legislation to stop data center development. When you look at those two things together, there is a consolidated effort that you could paint a picture of to slow down the development of the AI economy in the US and give someone a chance to catch up because...
China, you're referring to with the SCOPS of slowing down the data centers, the NPR report that that data center was being slowed down.
The velocity of capital is what drives that innovation engine. So the rate at which we can improve our AI models, the rate at which we can improve our AI chips is driven by how fast capital moves through the system. The more quickly capital moves, the more capital moves through the system, the more we accelerate our advantage. So if an adversary can slow down capital moving through the system, they are given an opportunity to catch up.
It doesn't have to be an adversary. It could be somebody who just wants us to be in a recession because they benefit politically.
Or they are a fundamentalist. They could be someone who is fundamentally anti-progress and they are fundamentally against AI and they have all these fundamental beliefs that AI is going to harm humanity and harm civilization and they want to turn it off. So then that would be decelerists and the regulatory capture Anthropic crowd.
Chamath, what you're saying, people who might benefit from a recession, I think most of the audience are reading...
But wait, well no, hold on, I want to clarify this, Jason.
If you look at it narrowly, technologically, ankling Nvidia does not make your chips better, doesn't make your racks better, doesn't make your networking better, doesn't make your CoWoS better, doesn't make your HBM integration better, doesn't make you replace CUDA. None of those things are true. So unfortunately, slowing down this giant for the people that assume that it helps other people, it doesn't help other people in the classical sense. It's not as if demand is so elastic that now all of a sudden you can go to somebody else. That's not what's going to happen here. It's just the entire industry gets slowed down. That doesn't benefit anybody. And I hope people really internalize that.
So technologically speaking, what's going to happen here to Nvidia is just a tragedy for the broader AI industry. Then there's the question economically, and this is where I do agree with Sachs that there are geopolitical interests at play slowing down the United States economy, which this will do, will have downstream impacts. The quantum of that is yet to be determined, but it's non-trivial in my estimation because so much of our economy was already levered to AI. And within AI, you know that famous picture, you know, Jensen and Nvidia is that little Jenga block right here. They're the ones around which everything else was being set up. So I just think we have to remember that because I think it's important.
We have an important example here that we should consider. When Steve Jobs passed away and Tim Cook was put in charge of Apple, he was able to just get a massive amount of share appreciation by doing stock buybacks and milking Steve Jobs' roadmap. But to your point, nobody's sitting here saying Apple's latest products are incredible. These are groundbreaking products. So we could see Nvidia go to just extract max value, etc. Could be good for shareholders in the midterm. Not sure if it's going to be good for the long term. And obviously Donnie from Queens, our favorite...
President Trump has suggested Tim Cook come out of retirement and take the position. So what were your thoughts there?
Look, Tim Cook had a very successful run as CEO of Apple. Obviously, had a tough job in the shadow of Steve Jobs, but the reality is that they did not release that many new products. They created incremental versions of what they already had. And I think that the mobile phone space is just a little different than chips. I think the chip space is more dynamic. It's more competitive. Like I mentioned, new chip generation every year or so, every year and a half. And if you lose a tempo or two, if you lose velocity, I think that's the key word here that Friedberg used is velocity, then you get overtaken by other people. I think that's the issue here is that that's what creates the risk for Nvidia is I don't think they can just keep milking their existing product lines or making them incrementally better. I mean, the chips are getting better at a rate of several times a year, you know, three, four times a year, maybe more. If they don't keep up that pace of development and others do, then they will no longer be frontier and then they lose their business. So, you know, I just think it's a very dynamic space and I think that's why again, I mean, I don't know how many times I can say this, that Jensen was very important to Nvidia and Nvidia was very important to America remaining at the frontier and having leadership in chips and technology not being used to enable a totalitarian state.
I do worry that there is legislation coming our way with the new Congress that is going to say every AI chip and every computer and every data center has a switch and has a connection back to some central system, and that central system will be a state system, and we are fundamentally looking at an Orwellian state explosion if this sort of thing happens. And my guess is that people know Jensen's philosophy. Jensen has talked a lot about AI being for the benefit of all of humanity, regardless of your country, regardless of your standing, regardless of your wealth. He was anti-oligopoly. He was the opposite of the oligarchy and the central state, the totalitarian state represents everything that I believe Jensen was against. And because of that, I think he had to be taken out if ultimately the goal is to have the totalitarian state use this technology as a tool. I really do worry about that being the reason because at the end of the day, whoever comes in next has to be cooperative with legislators and work out a bill that we all agree to, head nodding, standing in front of Congress and saying, you know what, I agree with these new ideas. Let's all go do this. And suddenly the US government has control of the actual physical chips that exist in free markets and exist in data centers around the world. And that's not a great place for any of us.
You know, it's worse than that. It's in order to get out of the cul-de-sac that they're in, it'll be worse than just acquiescing. It'll be proactively designing these things in, like what Jason said about having, you know, it sounds insane. Even 10 days ago, if you said, 'Oh, hey, our new spin is going to have a GPS chip and a remote kill switch that's going to be operated by some government entity,' we would be crying bloody murder on civil liberties grounds.
Yeah. And to your point, that is probably on the table because all of these folks are going to try to get out of jail in that sense, which is what do we need for the government to just let go and appease them? I tweeted this out. Nick, can you show it? The person, Representative Molinar, who runs the House Intelligence Committee, he posted this. The part that concerns me is it is in our national interest for Nvidia and other AI champions to succeed. But American companies should never jeopardize our national security by giving Chinese companies access to their most advanced chips. Nvidia must now change its corporate practices and appoint leadership that makes national security's top priority. I mean, they're telling you right now what the terms will be for this to end. And it's going to require some level of control checks. And then the question is who actually will get the keys? Will it be the NSA? Will it be the CIA? Will it be commerce? Will it be BIS? Will it be somewhere in Treasury? Some congressional committee that'll be.
The devil's in the details here, Chamath. This has been something that's been on the table. There's something called the Chip Security Act. It's bipartisan. And the Chip Security Act, there's a big question with these kill switches. Is it self-enforced? In other words, Nvidia puts these in and Nvidia pays the price if their chips are found in China via Singapore, Malaysia, wherever, and they would pay the price, but it would be up to them to track them and then reassign them. So, if they were resold, instead of it just being paperwork, you'd have to reinitialize them. By the way, this is very easy to do technologically. People will claim it's not. It is a civil liberties issue obviously as you correctly point out, Sachs, but it's easy to do because if you have an iPad and you've ever bricked it and it's like you don't remember the password, now you got to go to the store and they can recover stolen iPhones and stolen iPads with this basic, basic technology. So, as I described it, Sachs, very easy. And there is this act and it is bipartisan. There's a lot of people who want chips tracked. Now, whether it's being tracked and it's the responsibility of the company or a government organization, that's the devil in the details there. One is obviously way worse for privacy and civil liberties. So, what's your thought here on this regulation of high-end chips?
Let me go back and just give you guys a little bit of context on chip regulation. So this started in 2022 in the Biden administration and the Biden administration was the first to put export control restrictions on advanced semiconductors. At the same time they permitted what they called lagging chips to continue to be sold into China. So there was a distinction made between leading edge chips and lagging chips. And leading edge chips were prohibited to be sold to China, but lagging chips like the H20 could be sold in unlimited quantities to China on an unlicensed basis. Okay, so just everyone kind of keep that in mind. Now, what happened in the Trump administration? The Trump administration basically stuck with that framework. The idea was no leading edge chips to China. However, lagging chips could potentially be sold, but the administration changed it to be limited quantities on a license basis. So again, we went from unlimited quantities, unlicensed of lagging chips under Biden to limited and licensed under the Trump administration. The reason why I say this is because there's an effort right now to re-con chip policy to try and create this narrative that somehow the Trump administration has been soft on China. This is what all the Democratic leaders are trying to do. They're already trying to use this whole Jensen thing to basically spin this narrative that the Trump administration has been insufficiently tough on China. Now, this is an extremely hypocritical narrative in a number of ways. First of all, many of these politicians were very much in favor of an engagement policy towards China, which ended up exporting large numbers of our jobs and industry over to China. It was Trump who in the first term really caused a revision of that doctrine. We moved from engagement to a much more standoffish policy towards China. So that's point number one. Point number two is these Democrats are the leading people who are opposed to data centers. In fact, we just got a story about how in Maryland there was an abandoned shopping mall where a data center was going to go and a local activist basically managed to kill that data center. Not totally surprising. However, she credited the viral success of her campaign to the Party for Socialism and Liberation, which is a China proxy organization operating here in the US. It's called the PSL. And according to this tweet that I'm putting on the screen, it is the political arm of Shanghai-based Neville Roy Singham, who is an avowed Marxist multi-millionaire who's bankrolled anti-American pro-CCP nonprofits to the tune of $278 million. And Neville Roy Singham's political foot soldiers have been boots on the ground here in the US opposing dozens of data centers. And these efforts are most aligned with the Democrat party. So, if the Democrats are serious about opposing Chinese influence, I think we should conduct an investigation and have hearings on whether the CCP is actually involved in these anti-data center efforts across the country. You don't hear Democrat leaders trying to say that. So, I'm pointing out basically their hypocrisy on this issue. Let me go back to the issue of chips for a second here. If Congress now believes that we should not sell lagging chips to China, my view on that is fine. Let's make that the policy. I don't think the juice is worth the squeeze. I think there were some good policy arguments for why you might want to take market share from Huawei with a deprecated chip, a much less powerful chip. If you could take market share away from Huawei, those R&D dollars would flow to American companies instead of to a Chinese company and it would slow down the scale up of Huawei because chips are a scale up business. So that was the original reason why deprecated chips were still allowed to be sold into China and that was a logic that the Biden administration came up with and it was continued in the Trump administration. And like I said, there's now an effort to try and re-con anyone who wanted to sell deprecated chips into China as somehow being soft on China and doing China's bidding. Look, that was a bipartisan policy. If Congress now wants to change that policy and say we're not going to sell anything to China, fine, do that. Again, I think that, you know, given our political climate, I think it's too hard to have that nuanced policy. By the way, here's the most surprising thing about the whole thing. China doesn't even want the chips.
Didn't they put a ban on their...
Yes, they banned the H20 chip and then when the H200 got approved, they basically have prevented those chips from entering the country and they announced other Nvidia SKUs that they're against. So, China doesn't even want the chips. This is the thing that I think a lot of people in Washington haven't wrestled with is that the policy of the China hawks is effectively the policy of the CCP. Neither one wants American chips in China. Okay. Now, they want that policy for different reasons. The China hawks think it's going to help China to have American chips there. And the CCP wants to keep Nvidia chips out of China because they're trying to prop up Huawei as their national champion. So, they want to force the Chinese market into the arms of Huawei so that Huawei can scale up and then compete all over the world. So again, it's kind of crazy that people think that the CCP is begging for these chips. I think that Chinese companies want them, Chinese developers want them, but the Chinese government, based on all their public statements and their policies, is trying to keep out those American chips.
Clearly, the companies making LLMs covet the latest chips. Right now, Chinese government covets building their own chip champions internally. So, two things can be true at the same time. It's a very subtle point.
