Nvidia Loses Ground In Washington Chip Fight After Ceo Spy Scandal

The espionage scandal surrounding Nvidia CEO Jensen Huang is posing an escalating threat to one of the chipmaker’s biggest Washington priorities: stopping new restrictions on its sales to China.

Per lawmakers, congressional aides and lobbyists close to the debate, the revelation that Huang had an affair with an alleged Chinese spy has significantly raised the chances that Congress will enact chip export limits this year as part of a must-pass defense package, known as the National Defense Authorization Act.

After spending more than a year aggressively lobbying to pare back export control proposals, Nvidia appears to have shifted its strategy to lean on tech sector allies and major customers to make its case against the restrictions, per two Hill aides and a lobbyist granted anonymity to share the behind-the-scenes discussions. While Nvidia and its allies argue selling high-power chips to China is key to U.S. dominance in the artificial intelligence race, a bipartisan group of lawmakers pushing for the limits is warning that the access poses a national security risk.

Senior lawmakers in the House and Senate are negotiating the details of the defense package after returning this week from midterm campaigns. According to three of the lobbyists granted anonymity, the Chip Security Act, which would crack down on smuggling by requiring advanced chips to contain location-verification and tracking mechanisms, has emerged as the measure most likely to be attached to the year-end bill. Nvidia and other chipmakers warn the guardrails would raise costs.

Two other export measures with more far-reaching implications for the industry are also still in the mix, including one that has caused a stir among U.S. allies abroad.

House Foreign Affairs Chair Brian Mast, who is pushing for chip export restrictions as part of the defense package, told reporters Tuesday that the scandal has “100%” weakened Huang’s ability to lobby against the limits. Speaker Mike Johnson separately told POLITICO that he supported including export controls in the legislation, echoing House Minority Leader Hakeem Jeffries.

“It’s made a hell of a lot of people aware of something that they put little to no thought into before,” said Mast, a Florida Republican.

The momentum marks a notable break by Republican lawmakers from President Donald Trump, who has spent the past year loosening export controls and greenlighting advanced chips sales to China from companies like Nvidia. It also makes export curbs one of the few bipartisan priorities that Democrats are looking to lock in with GOP support during the lame-duck session of Congress over the next few weeks before they take control of both chambers in January.

The proposal to require tracking of advanced chips, sponsored by Rep. Bill Huizenga (R-Mich.) and Sen. Tom Cotton (R-Ark.), appears more likely to survive year-end dealmaking than two other export limits that have been floated for the defense bill, per three lobbyists with knowledge of the negotiations.

Those two proposals, which would tighten restrictions on chipmaking equipment, push foreign countries to match U.S. curbs and give Congress a chance to review licenses for advanced AI chip sales, have been a harder sell with companies that manufacture chip-making equipment and the White House. The administration has provided feedback on the plans, in a signal that it might not outright oppose them.

With the company’s reputation in freefall, Nvidia is getting help from other companies involved in computing hardware, many of whom are reliant on Nvidia’s chips for their own expansion plans.

“We’ve heard their position from six different directions,” said one Democratic aide whose boss has been involved in the negotiations over export control legislation, referring to recent conversations with tech leaders.

In August, Nvidia agreed to spend up to $105 billion to back one of the world’s largest data centers in Ohio that will be leased by OpenAI. Nvidia also struck a multiyear deal with Meta for millions of its current and future advanced AI chips.

A person granted anonymity to discuss Nvidia’s strategy said the company is moving away from the “aggressive elements of the approach” that it once took in Washington. The person attributed the shift to new leadership in its federal affairs team, after Nvidia hired Bruce Andrews, a former Intel government affairs chief and Obama-era deputy Commerce secretary, as its chief external affairs officer in June. The office now handles outreach “in a way that actually builds allies versus enemies,” the person said.

Many companies in the tech sector would stand to benefit from the export controls on the table, among them cloud providers like Microsoft and Amazon. Restrictions on sales to China would leave more of Nvidia’s chips for U.S. buyers, hobble the Chinese firms that U.S. AI companies compete against and give domestic customers more leverage with the chipmaker.

Capitalizing on Nvidia's scandal would also give certain tech companies a chance to cast themselves as the trustworthy partner on national security, an edge when competing for lucrative government and defense contracts.

“These companies, internally, they're trying to figure out how do they take advantage of the situation,” said a lobbyist from an AI policy group who was granted anonymity to speak candidly. “I wouldn't be surprised if they do a push for these strong export controls, too, but not just because they think it's good policy, but they probably see weakness from Nvidia.”

Jasper Goodman contributed to this report.