As all of you likely know, Nvidia and its CEO, Jensen Huang, are in the midst of a major crisis — with possible implications for the global economy.
Nvidia develops the advanced GPU chips used by AI companies like OpenAI and Anthropic, and is at the very center of a spaghetti tangle of circular financing involving truly staggering amounts of money:
If Nvidia were to fall, it “could tank the whole AI investment market.” Given the role of AI in the US economy right now, the AI bubble bursting would likely result in a pretty significant recession.
The Nvidia crisis arose from revelations that Huang was having an extramarital affair with a woman named Alice Huang (no relation), who US intelligence has identified as a Chinese spy. She “became a U.S. government concern,” the New York Times reports, “after surveillance revealed that she was feeding information directly to Beijing.”
In an email to staff at his company, Huang admitted having an affair, although he didn’t confirm that it was with Alice Huang. It appears that the most heart-felt parts of his email were generated by AI:
Jensen Huang’s paramour is “chief executive of a Singapore-based datacentre company” called Megaspeed. Over the past two years, Megaspeed has purchased some $4.8 billion worth of chips from Nvidia, and officials suspect some of these chips were being smuggled into China. (Nvidia “previously launched an internal probe into the allegations but assessed that there was no evidence of wrongdoing.”)
During the Biden administration, rules were implemented to prevent China from buying Nvidia’s most advanced chips. Trump rescinded these export controls, possibly due to Jensen Huang’s influence, as Huang has been a fierce critic. According to NBC, Huang called such restrictions “fundamentally flawed” and a “failure,” while praising his friend, Trump, after the administration “replace[d] them with its own restrictions.”
In an article titled “Jensen Is Cooked,” Gary Marcus notes that “in a slew of recent interviews, [Jensen] practically comes off as a lobbyist for China.” But many in the US, most notably Dario Amodei, don’t want China to have access to Nvidia chips because this could better position China to win the race to build artificial superintelligence (ASI). As Trump puts it, “whoever wins AI, wins.”
You can see the problem: Jensen Huang has been pushing for Chinese access to his chips, is close with Trump, and likely has access to state secrets — and it turns out his romantic rendezvous partner is a spy for Beijing.
Even worse, the New York Times reports that, in 2025,
investigators at the Commerce Department were deep into a monthslong investigation of [Megaspeed] … when their work came to a sudden halt late last year. …
[T]he case was abruptly transferred to the Justice Department … after Commerce Department investigators working on the case received an email from Nvidia’s general counsel seeking information about the inquiry into Megaspeed.
Other outlets have picked up the story:
Yet another report from today notes that Alice Huang “pitched an AI chips deal to China-based investors, touting her ability to secure the US company’s coveted GPUs and her commercial relationship with Chinese tech giant Alibaba.” About this, Marcus says: “It’s just getting worse and will continue to get worse.”
A different report estimates, to quote Ed Zitron,
that over 20% of NVIDIA’s Fiscal 2027 revenue — around $43.2 billion — was “driven by China via illegal GPU diversion and Southeast Asian intermediaries.” If this is the case, Megaspeed might be the tip of the iceberg and someone could very well be going to jail.
Also noteworthy is that Trump was briefed about a year ago about Jensen having “a close relationship” with the Chinese spy, but took no action. Whoops.
As you can see here, Nvidia’s stock have been falling:
And again:
Behind all of this lies a wave of additional bad news for the AI industry. For example, with respect to both OpenAI and Anthropic, token usage has been declining:
And although the AI evaluation company METR released a startling report showing that the rate at which Anthropic’s AI models are improving is “at around twice the rate” compared to the period between March 2024 and October 2025, plotting the data against spending yields a rather different picture of diminishing returns:
And again:
Meanwhile, bankers and investors are growing “wary of AI debt, spooked by” the recent market selloff. Not only has the market been fluctuating downward due to fears that incoming Democrats will heavily regulate the datacenter boom (yes!!), but the debt that Big Tech companies have accrued is truly mind-boggling. As Yahoo! Finance reports,
The five major hyperscalers leading the global AI boom have collectively spent hundreds of billions of dollars in 2026, pouring money into the infrastructure build-out underpinning the AI trade.
Those same companies — Alphabet (GOOG), Amazon (AMZN), Meta (META), Microsoft (MSFT), and Oracle (ORCL) — have also racked up roughly $3.2 trillion in commitments that don’t show up on their balance sheets, according to Goldman Sachs, adding another layer to the massive spending by the companies financing AI.
In other words, the off-balance financial commitments of the AI infrastructure build-out is a staggering sum, which these companies will need to somehow pay.
All of this looks very bad for the AI industry’s prospects. Usage is dropping, the public has turned against Silicon Valley and datacenters, and the company at the very center of the circular financing insanity is run by a guy who was pushing for business with China while sleeping with a Chinese spy.
I have absolutely no idea if the AI bubble is about to burst — I am a lowly philosopher and part-time historian, not an economist or finance expert. But if it does happen, the results could be quite devastating, especially given other things happening in the world, like the Iran War and the impending Super El Niño:
But what am I missing? What do you think I’ve gotten wrong? As always:
Thanks for reading and I’ll see you on the other side!
The overly positive METR report should not surprise anyone. After all, the METR guys are in the same TESCREAL whatsapp group as Wario and Scam and Elmo and and and…