Chipgiant, Nvidia has lost more than $400 billion of its market cap in the last few days after alleged affairs and Chinese spying surfaced relating to the Founder and CEO of the company, Jensen Huang. And the allegations against Huang are serious in nature.

Reports alleged that Huang’s personal relationship with ‘Megaspeed’ executive- Alice Huang has led to several high-powered Nvidia chips making entry to China illegally. Notably, the US government has imposed several restrictions on access to Nvidia chips for China. According to reports, Alice Huang is believed to a Chinese government’s spy agent.

While these are all allegations and only ongoing investigation will clear the air, but this event has shocked the business world globally. Reputational risks arising from Nvidia Founder’s relationship with Megaspeed executive has shaved off market cap of the chip giant. Now, an internal committee of Nvidia is investigating into the alleged affair of its CEO.

Whatever may come out of this investigation, but the damage has already been done with many expecting Huang to pass on the baton of the CEO role to a professional in coming years. However, personal relationship of top leadership, putting the company in trouble is not something new. Globally, there are several such examples including India. What is new in the Nvidia episode, is the extent of competition between the US and China to take a lead in the ongoing AI race. History shows that nation states use spies to find out various aspects of a rival or competing nation. Since the First World War, state-sponsored espionage is very much a part of statecraft. There were several instances of spying activities between the US and erstwhile USSR during the cold war period. In the last 30 years, such spying operations have intensified between the US and China as the latter emerges as a competitor to the world’s biggest economy in several areas. Currently, the US and China are seen as competitors with their horns locked in all emerging areas of technology. Especially, AI has seen the highest level of competitions in recent years.

While the US has come up with several LLMs (large language models) with companies like OpenAI, Anthropic, Meta and others innovating consistently; China also has its own foundational models with several companies operating in the AI space. While the US is home to several cutting-edge chipmakers, China holds the rare earth minerals that are required for making these chips. Interestingly, both are using their respective leverages to create roadblocks in each other’s AI growth. For instance, the US has imposed restrictions on access to high-end chips for Chinese companies.

Similarly, China is regulating the supply of rare earth material required for advanced chip making to the US. However, this level of competition is not limited to supply control. Rather, the Nvidia episode shows that both are also actively involved in undertaking spying operations to find out about the extent of development in the AI space.

So, Nvidia episode should be seen as a nation-level rivalry than a company-specific issue. And in all probability, such episodes will continue to surface in the future as geostrategic competition grows. For a country like India, this holds several lessons. As India grows, it is critical that all our vital technological advancements in both public and private sectors should be ringfenced from such espionage activities.