I'm not too surprised to discover this, but it is very concerning.
Deliberately installing a backdoor would pretty much be economic suicide.
The political risk can be really big. I think that goes back to my main point that the U.S. now sees China at least as a peer and equal.
They're not going to give away the crown jewel.
So the only way to truly prove that would be to open all of the design documents around the chip and that would be commercial suicide.
We're going to see a running horse situation until we see who is the final champion of all these horses.
Welcome to the chat lounge. I'm Tian. Joining me to discuss China's probe into U.S. tech giant Nvidia's backdoor security risks in its AI chips.
Professor Toby Walsh, Chief Scientist from the AI Institute, University of New South Wales, Australia.
Andy Mogg, Senior Research Fellow at the Center for China and Globalization.
And Professor Qu Qian, Fellow of the Belt and Road Research Center, Mingzhu University of China.
Welcome back to the chat, gentlemen. So China's cyberspace regulator, the Cyberspace Administration of China, or CAC, has summoned NVIDIA, raising concerns that its H-20 artificial intelligence chips contain backdoors.
The move reportedly came after some Chinese developers, through reverse engineering, discovered an undisclosed remote management module hidden in the firmware of Nvidia's H20 chips. specially designed for the Chinese market.
And also reports suggest monitoring data reveal the chip was periodically sending encrypted packets to an overseas IP address, believed to be an NVIDIA data center, while running.
And users had no way to turn off this through system permission.
So let me start with our scientist here.
Toby, how concerning is this finding from a technical and security standpoint?
I'm not too surprised to discover this, but it is very concerning.
It's the beginning of, I think it's going to only intensify the concerns that it's putting a backdoor into a system like this could introduce, allow lots of Lots of malware, lots of misbehavior to happen.
And the fact that NVIDIA was somewhat secretive about it makes their excuses sound less and less plausible.
That if it was just a performance device, then why wasn't this in the spec?
Why was this something that had to be discovered only by accident by someone who went to the considerable effort of reverse engineering it?
You said it can be utilized by some malware.
What can a hardware backdoor do in a chip?
Well, it's hard to know without seeing the exact code, but anything like this that has presumably privileged access is something that you would be very concerned to know what it can do, why it's being used, and whether this is a way, for example, for the chips to be stopped at some later point.
I mean, it's the sort of thing where the fact that NVIDIA didn't tell you about it, you had to discover it, does leave you worried.
And from a third country's perspective, how sensible do you think the Chinese regulators' concern is?
I think it's entirely sensible. I think the Chinese regulators should be seriously concerned.
I fear that this is only going to amplify the tensions that already exist between China and the US, the feeling that each side needs to win this AI race, that we can't work cooperatively on this.
I mean, it's not surprising because the US under the Trump administration has made it very clear that it's America first and the latest AI action plan that America wants to win the AI race.
It seems whatever it takes. To Andy, to your knowledge, how unusual is it then?
Well, so first of all, I completely agree with Toby that from a technical perspective, installing Some sort of backdoor or a kill switch is technically feasible and perhaps even technically trivial.
But here's the issue. NVIDIA is a for-profit publicly listed company that really has a lot riding on credibility and trustworthiness.
So I think that deliberately installing a backdoor would pretty much be economic suicide. for Nvidia.
But let me what I really want to say is that we let's zoom out and look at the bigger picture here.
And I think what this shows is that we are witnessing in the last year or so a profound power symmetry reset Because historically, the US has always said, look, China, we cannot give you this technology, that technology, because it threatens our national security.
And when we negotiate with you, it's only going to be on what we define as trade issues.
And what we call national security, we will not negotiate with you.
And what we've seen in the past year is that the U.S. now must treat China at least as a peer and not as a subordinate to which it can dictate which topics we're going to talk about and which topics we are not going to talk about.
And again, I think Toby's absolutely correct that the Chinese government is absolutely correct to be concerned about this from a technological perspective, again, even though it would be economic suicide for NVIDIA to do this.
But also, we all know, or maybe some of us know, our audience may not know, but the US Congress now is discussing passing a law that would exactly require companies like NVIDIA to put these so-called back doors or perhaps even kill switches into their chips.
So this then I think puts Nvidia in a potentially untenable situation where again, whether you're China, whether you're the UAE or whoever, you probably don't want this kind of backdoor because this gives someone else the power to shut down what could be a piece of critical infrastructure or at the very least leak sensitive information.
So, you know, again, I think NVIDIA is in a very, very difficult spot right now.
We will further explore the U.S. Bipartisan Act Andy just mentioned.
And Andy, you said it's tantamount to an economic suicide, but if you can find the backdoor, right?
That's the precondition, isn't it, John?
Do you remember your first response to this?
Well, I think it's... Not easy to say or to tell what is the real truth.
But I do think Chinese government have all the rights to be suspicious of about what's really been happening.
Even though I think Nvidia can be innocent of themselves.
I still remember the Prism incident and that period of time with Snowden.
It shows that the NSA actually been putting a lots of the back door software or bugs in many servers or related devices to watch over everything happening on the internet.
Some are purposefully implanted, some are not.
For example, Apple have been seeing some leak or the bugs on their servers monitoring millions and millions of the Apple terminals.
But Apple, the company, they insist they didn't know about it.
And it looks like it from the testimony. that Apple didn't know it.
So they have some spy or agent implanted the bugs into Apple's machine without noticing Apple.
So we don't know whether Apple has accomplished this or not.
But the fact is NSA actually been using all kinds of a loophole to monitor, watch over all this equipment all over the world.
And I think the most interesting situation is that even Merkel, the former chancellor of Germany has even been bugged by the NSA.
So that was quite a scandal. I still remember that news.
So I don't think Apple would be really that cooperative if they know they're going to bug one of the national leader of their closest alliance. and also one of the biggest European market.
So I think that political risk can be really big.
I don't think any leader as proud as Steve Jobs or later the leader of the company would agree to, you know, work with NSA to do so.
But the fact is, you know, all this nation after that event, they're very suspicious about American equipment because even though those companies The builders are not willing to do so.
The government in America or certain government department would have all this kind of a motive to do so.
So I think for China, this is a similar situation going on again.
Even though maybe Nvidia don't know about it.
Nvidia could say, okay, this is just a working tunnel.
We use this kind of a link to see the feedback about the customers, because sometimes We will ask the customers, are you allowing us to trace the data?
Are you allowing us to, you know, to see what's happening to your machine so we can, you know, trace the problem code to see what kind of problems you have?
Yes, that probably is Nvidia's purpose. I don't think Jensen Huang, a person like him would like to, you know, be the little student for, you know, NSA or someone, but he cannot prevent the government and intelligent agent to do so.
So that's a problem. So before we can fully rule out this kind of a potential that the machine can be used for the spying purpose, Chinese government have all the authority and all the rights to evaluate the whole situation, to see whether this machine is compromised or not, to make sure the national security of China is fully secured.
I think that is a right thing to do. So I think that probably would be the situation.
So we're going to see what's going to happen.
Probably it's going to be a very long-lasting event like the prison event used to evolve.
No clear consequences or no clear result will be eventually revealed.
Just to get silence and people forgot about it.
The chat lounge unpacks views and opinions on hot issues in a more casual way.
Indeed, actually, it's a technical issue, but it's a very difficult one to tackle.
And you've already said that the Chinese government or the authorities have every reason to be worried about over its risks, but Some people are also saying that the move actually came after the White House decision to end tariff exemptions for low-value packages under $800, many of which are shipped from China.
So they say there is some political motivation behind China's move this time.
So, John, what's your take here? Well, I, I'm not sure whether it's for the low value packages, because that's not quite an important issue comparing to the whole piece of cake between China and American trade.
That was really a, you know, that is really a small part of it.
I don't think you're going to use the Jensen Wong's NVIDIA GPU to, you know, bargain with this low value parcel.
I think that is a big card, a foul used.
What about the bigger trade conflict? Oh, yeah.
NVIDIA might be the one, but we're not sure.
Jensen won. I used to be part of the, uh, the son of the meetings, you know, when he was there.
I understand Jensen has actually been very, very smart person.
He actually want to do the business and it put forward actual progress in a technology and also accelerate the involvement of, you know, the AI and GPU.
So he's not quite interested in this kind of political back and forth.
So I don't think Chinese government really wants to do that, to play NVIDIA as a card.
Sometimes if there is happening – when NVIDIA just becomes a convenient thing here, so China don't want to play this card.
But it happened that they do come with a problem.
So I think if I was in the game, I probably should say, yeah, what the hell?
Let's do that. I think it happened before when Tesla just entered China and also been cooperating with China.
And then Trump has been launching the first round of the trade war with China.
China also found their back doors and Tesla and their data center in America that lots of the data of the mapping.
In China has been you know cross bordered to America, which is against Chinese law, by the way, this law has been long existing.
So foreign companies are not allowed to store the Chinese you know mapping data and ship to you know other nation.
That's the reason why Google was out of China very, very long ago.
So I can tell you that law has already been there for a very long time.
So Tesla just coincidentally violated the law.
So China thought, well, maybe we can use that as a card to play against, you know, Trump administration, the first administration.
Oh, later we found Tesla has been working with China really well.
They're just a company. They just want to do technology and do business in China.
And their political view is quite neutral.
So we didn't do that. So you're hoping the same will happen to Nvidia as well?
Yes. I think we don't have a stereotype in our mind to say, okay, we're going to nail down Jensen Huang.
We're going to, you know, slap on Nvidia's face. to see what's going to happen and what we can get from it.
No, I don't think that's the thing we will do.
We'll just walk along and see what's going to happen and do the things we need to do.
And then, Andy, do you agree? How much of it do you think is part of a broader tit-for-tat dynamic between the two countries then?
Well, you know, I think it's really hard, of course, to have a definitive sense of what their government actually intends here.
But I think, you know, from where I sit, it certainly seems, as we've all said, that these potential national security concerns are very legitimate.
So they're technically possible. Again, you know, the economic suicide for NVIDIA to do this.
But I think John makes an excellent point. where I believe there have been documented instances where hardware has been tampered with, you know, either at the factory or after leaving the factory and implanted with these surveillance devices.
So, again, I think, you know, in and of itself, this concern is completely legitimate.
If we step back, and again, I think from a sophisticated negotiating strategy perspective, and I think here it's remarkable that Scott Besant, the U.S.
Secretary of Treasury, has said that, you know, the Chinese are patient and they are tough.
So I think that Absolutely correct. And I think it is a remarkable acknowledgement.
I think that goes back to my main point that the U.S. now sees China at least as a peer and equal.
And again, any sophisticated negotiator takes a strategic approach and always considers how one factor may affect something else.
So I think it would certainly be reasonable to say Assume that China's concern or its publicly expressed concern about NVIDIA chips not only has the strategic negotiating purpose, but also I think an important signaling purpose to Chinese companies.
So not just the buyers of NVIDIA chips. But I think also a signal to domestic companies like the Huawei's, the more threads, the other companies that look, we really do need to have alternatives.
So, again, you know, it's hard to know truly what any government is really thinking.
But I think it's reasonable to assume that.
This is not only legitimate in and of itself, but also part of a larger strategic initiative.
All right. Let's talk a little bit about some technical issue.
The CAC asked NVIDIA to submit the H20 chip security design documents to prove the tracking and positioning and remote shutdown functions will not become backdoors.
And Nvidia CEO Jensen Huang, like you mentioned, has denied the existence of any backdoor.
And a company spokesperson explained the data anomaly as a remote diagnostic service. saying it was intended solely for hardware troubleshooting, which requires user authorization and activation, and it complies with the globally accepted transport layer security encryption standard, namely TLS 1.3.
But the tech community remains skeptical.
They're saying, if it's solely for diagnostics, why refuse to disclose the data triggering conditions and encryption protocol details?
So Toby, I think you've said that Jensen or NVIDIA is less credible right now.
So I guess you are not on his side. Yeah, I mean, they're really caught in a dilemma here, which is that the only way you're going to win over the support of the tech community, win over the support of the regulator is some pretty radical transparency.
But they're not going to want to do that for commercial sensitivity.
They're not going to give away the crown jewel.
So it's very hard for them now to bring back, build back the confidence that. that is required that they aren't going to be slipping these sorts of things in because we know that, again, the dilemma is that they are caught in the middle here.
Jensen has made it very clear he just wants to sell his chips to everyone.
He's managed to persuade uh the trump administration to let him continue to do that uh this you know as usual the trump administration's flipping flopping backwards and forwards on these sorts of issues but at the moment and they're being quite willing to let nvidia sell their chips but equally we know that they've you know there's discussions to you know to put in uh these sorts of backdoors as a you know as a legal requirement to be able to sell them outside the u.s so I wouldn't like to be caught in the middle like Jensen is at the moment because the pressure must be pretty intense from all sides.
You're saying that he is caught in the middle, but he can prove it, right?
From a technical perspective, how difficult is it for NVIDIA to prove its products have no backdoors then?
Well, I think that's next to impossible because the only way to truly prove that would be to open, you know, all of the design documents around the chip and that would be commercial suicide.
That would give away those trade secrets that NVIDIA certainly would have in the way that they design and program those chips.
So you're saying it's hard for them to cooperate with the authorities?
Yeah, just because they don't want to give away the commercial secrets that they have within those chips.
It is, I should point out from a technical perspective, it is entirely possible for people to run these offline in a closed box and then, you know, unless there's a radio transmitter somewhere hidden that you haven't found. then it can't possibly be sending messages back over the internet because it's not connected to the internet.
But of course, that makes it a less useful device for you because now you're going to have to be physically present to be able to connect it and so on.
But air gapping would be a way of ensuring that if they sold you something, that it was not sending back information or not being changed at any point without you knowing.
But if NVIDIA didn't cooperate, how difficult would you say it would be for, you know, Chinese engineers with the regulator to identify a hidden backdoor that a third party could utilize?
Well, we're talking about immensely complex chips.
Yeah. So reversing engineering, everything on there is, is a very tall order.
So it would be very, very hard to be absolutely confident.
I'm not sure that you could be, I mean, there's some very subtle ways you could embed these sorts of things into what's looks like legitimate, you know, internet traffic that's coming out of the chip, but is actually carefully disguised coded messages that are, that are being leaked out along with stuff that looks quite harmless.
Indeed, that's what I've learned from other reports that actually engineers or chip scientists, engineers in Jiangsu in Shanghai and also with the Chinese Academy of Sciences, they're working on this, try to decode or identify what's the secret in the chips.
But obviously, so far they haven't found, they are not able to find anything, but they're saying it makes it more suspicious.
It's suspicious because it was done without being transparent about it.
And it was done without seeking the consent of the users.
I mean, most of us are aware, you know, when you buy a new laptop, Typically, when you started up, you'd ask for your consent to share diagnostic information back with the supplier of the laptop, which will be used by them, of course, to help them identify systemic bugs within the software, within the operating system, or to help them optimize how your computer works.
But you would have noticed you got asked that when you started the computer up.
And frequently you can opt out of those things as well if you decide that you don't want to share that performance data.
So it is somewhat suspicious that they're now retrospectively claiming, oh, this is just diagnostic information, which it could be.
Well, it could be, but... But, you know, then you've certainly done the wrong thing by not telling the user that you're going to be collecting that diagnostic information, perhaps not even asking their consent.
So the fact that it was discovered secondhand is troubling.
This has been a chat lounge. And what are the broader implications of the NVIDIA backdoor probe?
That's coming up next. Sideline Story brings you all things sports related.
The hottest topics, latest events, juiciest stories, all with a very personal take.
Subscribe to Sideline Story podcast for heated sports discussions covering events that are happening in China and around the world.
Welcome back to the chat lounge. We continue our chat on China's probe into NVIDIA's backdoor security risks and its AI chips.
And I can share with you an instance from the Chinese Academy of Sciences laboratory.
They've already sliced an H20 chip into nanometer-thin slices and scanned it.
20 000 times within electron microscope that the result revealed no abnormal gps antenna but this precisely exposed the problem remote control programs can be pushed as encrypted firmware requiring no additional hardware an engineer at a beijing testing agency said it's like searching through a car factory for parts only to discover the bomb has already been programmed into the car's computer.
So it sounds quite dangerous or threatening, doesn't it?
It demonstrates the extent you have to go to try and reverse engineer.
I mean, slicing a chip millimeter by millimeter, and then there's a huge amount of stuff that you've got to look at to find.
It is one of these needle in a haystack problems then to find it.
And then, as he was saying, it could well be There's nothing in the hardware.
It's hidden in the firmware. Therefore, it's going to be incredibly hard to be sure.
And so, Andy, based on what we just discussed, do you think NVIDIA will or should fully cooperate with Chinese regulators, prove its credibility?
So, you know, I think that Jensen Huang, I think, has stated very clearly that it would be a grave strategic mistake for the US to withdraw from the China market.
So of course, companies like Nvidia, Qualcomm, Intel, depend on revenue for China to fund the next generation of technology.
So that's one reason. But the other reason that Jensen Huang talks about is that by withdrawing, this will create a market vacuum for companies like Huawei, some of the other GPU companies in China to advance, secure the China market, and from there compete and ultimately undermine U.S. technological supremacy globally.
So I think given that, I think NVIDIA will do everything it can to reassure the Chinese government, Chinese companies, and frankly, governments and businesses all around the world that their products are trustworthy.
But here is the dilemma, right? As we talked about earlier, if the U.S. government does pass, I think, what would be a very foolhardy law forcing NVIDIA to do this, again, it would be Causing, you know, it may can video really commit, if not suicide, but certainly perhaps irreparable harm to NVIDIA.
But would they, you know, pin their hope on that the authorities cannot identify any backdoors or any leaks there?
You know, I think that that probably would not be a very smart strategy, Yoon, because, again, you know, just like in the open source world, people say that with enough eyes, no bugs are shallow, meaning if you have enough people looking at something, you will find it.
And, you know, I think there will be many, many scientists, engineers, even engineers ordinary people all around the world who would be very motivated to find any backdoor or any security flaw in NVIDIA products, you know, whether we're talking about the hardware or the firmware or whatever.
So, you know, it seems to me that that would not be a very sensible approach.
Okay. John, you see it the same way? Yes.
I agree with Andy that this is going to be a very complicated situation.
Basically, no matter what we're talking about, the situation here today, well, it doesn't decide the whole thing's evolvement into the future.
Actually, as I said, well, luckily, I got some remote connection with Jensen because several conferences and also friends of a friend that makes me know him a little bit.
He is very shrewd, smart, but sometimes, you know, boyish person.
So I think his mind can be really pure. That is, he want our money.
He want to expand the market. He want to dominate the industry.
He want make, you know, breakthrough in technology.
And I think that's it. And I know that before he came to China, he put a lot of strain to find a way to talk to Trump.
And he personally pursued him that Trump can actually lift some ban on technology export towards China.
And then enabled his visit to China and talking to many partners.
And I think Jensen fully understands that he has a large market in China.
Not only business-wise, but also passion-wise.
He has passion about China himself. Because before everybody knows about him, actually we know about him like 20 years ago.
NVIDIA before he was an AI tycoon. NVIDIA is our gamer's god.
I mean, every gamer wants to have an NVIDIA GPU to play the latest game.
So he, before he was a tech guru, like Elon Musk, he's more like, you know, a very important person in the gamers community.
And China, you know, have probably the largest gamers community in the whole world, just next to America.
And he himself is a Chinese American. So, He have personal attachment towards this to market.
That's the reason why he always wants to, you know, build a bridge between the two sides.
So I think that probably is very, very different from what the current world and community understand about him.
For us, he is like the funder of all the gaming companies in America.
Yeah. So I don't think he wants to purposely just violate the Chinese law.
I don't think he purposely wants to destroy what he finally achieved and managed to do, to build a small bridge, even though it's just a solo wood bridge.
But he finally built it after 2020 and makes sure that the span has partially been lifted.
But the problem is that here's an inconvenient situation that NVIDIA is one of the most important and also one of the most sensitive company in the whole world right now.
He's not the king of the game where he represented it.
He is probably the one who can decide the life and the death of AI technology, about the future development of a nation.
So he needs to adapt to that kind of situation.
And also he will try to find another way to develop his own career and company as well.
Well, I still remember just three years ago when the first ban, has been put between China and America towards this technology export, he said, this ban is bad for NVIDIA, bad for America itself, because when NVIDIA can sell all these GPUs and chips freely to all the market, everybody can just buy NVIDIA, and which can solidify Americans' dominance and power in this high technology zone.
But when you're forcing them you know, out of this market.
So everybody can only build their own chips and GPU because they have no choices.
They cannot buy it, even when they put, add more, you know, money, put on more of the price on it because they cannot get access to it.
So that's been very frustrating and also make them doubted about their national security technological wise.
So it's going to be bad because so many competitors are going to pop out with the support of national government behind them.
Japan, Germany, China, and many countries, Russia, everybody are doing the same thing.
So it's been crippling NVIDIA's future dominance.
So that's why Jensen, from all kinds of perspectives, he wants to make sure His products can be trusted, can be sold freely in all the nations without to have this kind of ideological differences and also the conflicts of political ideas.
But now he again has been engaged with all this kind of political turbulence.
I don't think it's his own choices. And also, I don't think he want or he can prove that he is innocent.
Well, we have seen a law that if you say someone is guilty, whoever says it, who proves it?
I think that's still going to be the principle.
So I think in the future, it's not NVIDIA's responsibility to say they're innocent, but more to say, well, can we find more loopholes for China to say, okay, NVIDIA's products have some backdoors. is going to endanger our national security.
I think this time we also follow the same pattern.
Chinese authority said we find some back doors and loopholes in here.
That's the reason why we're going to say this is going to be a problem.
So in the future, I think Nvidia is still going to be, you know, have a very difficult position in between, between the two government, between the two nations.
And also they need to find a very delicate balance point. to stand up on it so they can do business between the two nations.
But I think this is a good challenge for them too, because if they can nail the situation, they can probably nail all the situation in the whole world from now on.
And they have to do so because it's a lucrative market that they can never give up.
And so in light of the Nvidia Security Probe, two major Chinese cloud computing firms Alibaba Cloud and Tencent Cloud reportedly have suspended their H20 procurement evaluations and turned to other chip providers.
So Toby, are they being too cautious? No, they're not indeed.
I think lots of people are going to be looking carefully at where they buy their chips from and there'll be increased pressure, increased incentive for these other manufacturers to step up. and you know take more of nvidia's market i mean it's been incredibly successful let's let's not forget nvidia is the most valuable company in the world it's worth more than four trillion dollars um there is uh you know a lot in play and so nvidia are going to be significantly troubled by this i'm sure and be worried that they're not going to lose market share as people look for alternatives the chat lounge The chat lounge unpacks views and opinions on hot issues in a more casual way.
To end the M, if unauthorized control functions are validated, yeah, we're not saying it will be, but if it's the case, how do you expect Nvidia's business in China to be affected?
Can you give us some figures or concrete figures?
Like we know that the Chinese market is Nvidia's second largest market after the States.
Well, what we've seen historically is that NVIDIA at one point had 90% market share in China, and that has gone down significantly.
So it really is a mixed picture. So on the one hand, NVIDIA still has tremendous lock-in in the China market because switching costs are very high so it's not just the performance of the chips but how easy they are to use how accustomed engineers here primarily, are to using them.
So we think about something like Microsoft Windows, right?
Once you get used to using it, it's really, really hard to switch to a new system, even if it's better.
So we have this on the one hand. So I think this is something to consider.
Technically speaking, the H20, while it's a so-called deprecated chip, meaning it's less powerful than the chips that NVIDIA's offering in other parts of the world like the United States.
It actually is a very, very well-designed chip because while its processing power is less, it's actually memory is more.
And why this matters is that we're moving from a world, at least for the next few years, to where most of the demand is inference-driven, meaning that it's used to answer questions, do things, versus training.
And the H20 is actually designed, optimized for inference.
So it has still some very, very powerful advantages.
I think it's going to make it very difficult for companies, whether you're a Tencent or whoever, completely abandoned so that's on the positive side on the other hand you look at huawei say with its ascend ship that they ascend 910 so it's abc versions you know have gotten some adoption but they're not true gpus so the d chip that is supposed to be coming out will be a much more direct competitor.
But more importantly, Huawei is also working on the software to make it easier to use.
So again, it's a very, very mixed picture that I think is very important to pay attention to, even though I've gotten a little bit technical here.
I think the ramifications are not just important for China, but again, globally. how this plays out for NVIDIA.
Again, you know, $4 trillion market cap.
I think personally, there's still tremendous upside for NVIDIA, whatever happens in China, because AI is just so economically transformational that that will outweigh any negative impact from China in the short term and perhaps the medium term.
But we still have to keep an eye out on how this ultimately plays out, who has the most competitive chips for inference in the short term, training in the long term, and who can offer the software that engineers most want to use to get things done.
So you're saying that even if it's got some competitive advantage there, it would be wiped off the Chinese market if there is a backdoor found in its chips?
Would it be that? Well, it's hard to say, because we have to make a lot of assumptions here.
So if some kind of security risk is discovered and it's not patched, you know, I think obviously, it would rule out certain use cases in China, probably other parts of the world.
But at the same time, again, just again, assuming that You know, the performance capabilities, the lock into CUDA, you know, the software that many engineers are used to using and like using, the code libraries, all these things.
I think still some companies would still use NVIDIA.
Now, of course, the big question mark in China is that would the government then say, look, we don't care.
Well, national security overrides any possible technological economic value and bans Nvidia.
And again, you know, who knows? It all depends on the details, right?
And how all these things will play out. But I think as things stand now, Nvidia still has a very competitive offering in China that many businesses, many engineers want to use.
And, you know, we have to see ultimately how not only this plays out, but the competitive landscape changes as well.
And again, like I mentioned, Huawei coming out with a more directly competitive chip with the Ascend 910D.
And, you know, if its software becomes much more compelling, you know, again, things could change.
So still got some hope there. You talked about this Chip Security Act that this bipartisan group of House representatives introduced in May.
It requires backdoors to be built into AI chips and allow them to be location tracked and remotely controlled.
You said chip makers obviously don't want that.
But do you think NVIDIA and its peer companies like AMD are able to persuade U.S. lawmakers to drop or revise those requirements?
Maybe Toby? It's hard to know. The U.S. position is so temperamental, unstable these days.
For a while, they were going to put in prohibitions of the very best GPUs.
Jensen clearly persuaded those people advising Trump that he should be allowed to sell into these markets now whether they're going to be persuaded by they definitely they'd be sold but they definitely have to back doors again it could easily go either way you never that's the problem with this current president you never know which way he's going to fall and he can easily quickly reverse any decision he makes so It therefore makes it very uncertain and it also makes it very hard for people to make investment decisions.
Yeah, that's true. And the future outlook is so uncertain, it is very hard to make decisions to invest large sums of money that we might be talking about.
Toby, how imperative do you think it is for those chip makers to persuade those lawmakers to drop those kind of acts?
Well, it's clearly going to be bad for business.
I mean, there's going to be certain parts of China that would not be willing to buy chips if they've got backdoors between them.
And why would you? If there are alternative products, which there are starting to appear, maybe you're going to look more carefully, more critically at those alternatives, because it certainly makes NVIDIA's products less appealing. than those that wouldn't have these back doors in them.
So it's going to be tough on NVIDIA's business for sure.
And they said clearly Jensen will be lobbying hard for the act not to be brought into force.
Less appealing, not just to Chinese users, but those in Europe, right?
Or in Australia, maybe. Yes, when I say users, I mean anyone outside the United States.
And indeed, even within the United States, You know, there are people who are using these products who don't want the NVIDIA's whims to be able to dictate whether the system is working today or not.
It's going to be for all possible users in every possible dominion.
Indeed. And John, I think Andy just talked about the broader implications of NVIDIA backdoor probe.
Then what are the broader implications of this system? for its peer competitors, such as AMD, which is still awaiting an export license from the U.S.
Commerce Department? I think this spillover is going to be long and large.
For example, if it's been proved that the Bechtel really exists, I think the H20 chips probably are going to be banned or have been recalled.
And also many big players in China probably wouldn't want to try this risk to order from them anymore, like Tencent, like Alibaba, like the DeepSeek.
It's going to be dangerous if they lose this kind of big players in China.
And also the Huawei data center probably will also, you know, unlimitedly delay all these cooperations.
And also Chinese competitors will absolutely be on a rise. like Huawei, like Anwuji, and, you know, because this kind of the revision systems on foreign chips is going to be harder and harder.
So NVIDIA and also even AMD probably is going to face a lot of problems.
And Huawei and also the Anwuji and all those Chinese players will be the first winners for sure.
And also for AMD, I think... even though they're also going to take the collateral damage together with NVIDIA, but in a short term, it will probably still have some benefit.
For example, many current customers of NVIDIA will switch to EMD, and also many players are going to buy their frameworks and incorporate with them.
It's like to use their products, but the Chinese chips are more like More like when we're working with Google.
So even though Google's framework has some problems, but still, because they're an open source platform, so they allow Chinese partners to build their own version upon it.
So I think for, uh, you know, Android systems, even though, when a lot of foreign operations system have some problem, but Android systems can still find their way into China.
I think for AMD is similar situation like that.
So in short term, they're going to benefit from it, but in the midterm, they will also suffer from the pressures, but in a longer term, it probably will do things like Android systems and try to find a way to take a detour to work with Chinese partners.
But, uh, Yes, I would like to say if this kind of competition continues, I think it will benefit Chinese local competitor.
And also this technology spillover is going to happen.
And also the oversupply for the whole industry will also occur.
So basically, it's going to be a lose-lose situation.
A structural win will happen, but for the whole world, it's more like a redundancy will be happening.
All right. And the last question to you all.
In light of this, what do you expect other countries like we just mentioned, such as Australia or European countries do?
Maybe we start from Toby. Sure. It's definitely going to open other countries' eyes to the risks that are developing here and to encourage them to start building their own sovereign capabilities and to be mindful of where they're buying their kit from.
As was mentioned just now, I think long-term is actually harmful to everyone.
It's harmful to global trade. It's harmful to innovation.
And it's unfortunate that this is really a consequence of Trump's make America great, put America first policy is now shaking out into tech like this.
All right. And Andy? So longer term consequence, you know, countries, other parts of the world with big AI ambitions.
So I would say the Gulf state in particular, the UAE, Saudi Arabia, that also have these concerns touched on, you know, about safety.
So, you know, I think chips, of course, matter.
I think we also need to pay attention to the kinds of models.
Open source, I think, is another area to pay attention to.
So lots of moving parts, it all matters.
And I think, you know, this again, why even non-technical global audiences do need to pay attention to what's going on in the AI space.
All right, and last but not least, John, please.
Okay, I think this kind of the conduct will probably be mimicked by some other nations.
In China, I think the trend in the supervision and regulation will probably become the technology testament first, and then national security and the data sovereignty will become the most important standard for this testimony.
And China will probably establish some law for the high technology product of procurement, which means if very sensitive technology like chips from a foreign country, then we need to go through national security checks, like many other nations has already been doing, Australia, United States.
So this is going to be the trend. And also, Many emerging markets probably is going to mimic that.
I think number one is India. India is going on an even tougher war with America in trade.
Modi absolutely don't like what Trump is going to – you know, dump on his head and slap on his face.
So I think India is going to follow suit.
And also other emerging markets probably want to use this legal framework to defend their own national security and also data sovereignty.
So in the future, very much likely in the next five or three years, three or five years, the world is going to be divided on technology because technology is going to be saw as one part of their national security and sovereignty.
So we're going to face a very much split world, but I think the competition will also pop up.
Everybody's going to develop their own technology, try to use their own standard.
And then we're going to see a running horse situation until we see who is the final champion of all these horses.
We'll wait and see. On that note, we wrap up our chat for this session.
Many thanks to Professor Chu Chang, fellow of the Belt and Road Research Center, Minzu University of China, Andy Ma, Senior Research Fellow at the Center for China and Globalization, and Professor Toby Walsh, Chief Scientist of the AI Institute, University of New South Wales, Australia, for your time and insights.
You can find us on all major podcast platforms.
Please email us your comments at radioatcdn.com.
Thank you for listening. Join us for more Chat at the Chat Lounge next week.
I cannot marry you while your mother regards me.
A captivating audiobook by Edith Eaton, read by Man Ling.
Because the green leaf still clings to the bough.
Experience the lively yet complex lives in Chinese American communities at the turn of the 20th century as Edith Eaton's delicate prose weaves together themes of tradition, change, love, and identity.
Forget all that belongs to the joy of life.
Follow the journey of Mrs. Spring Fragrance and witness the struggles and fights of those living on a rapidly changing exotic land while holding on to their cultural traditions or more importantly, hardly believe that his daughter was seriously opposed to becoming the wife of such a good-looking, prosperous young merchant as Wang Ling.
Join Books and Beyond for Mrs. Spring Fragrance.
Let the stories come to life in your imagination.
Subscribe to Books and Beyond for free on your favorite podcast platforms or log on to radio.cgtn.com for more.
