Alibaba Falls 1.17% as Scrutiny Grows Over Megaspeed’s Links to AI Chip Financing
Key Facts
Alibaba shares fell 1.17% in market data published alongside a Reuters report on November 12 that Chinese artificial intelligence companies were seeking to secure computing capacity backed by Nvidia chips outside China. The move came as scrutiny grew over Megaspeed’s ties, amid allegations involving the financing of one of its subsidiaries and access to advanced chips. Culper Research said its review of commercial records, company documents and conversations with Nvidia partners indicated that Speedmatrix, Megaspeed’s subsidiary in Malaysia, was “effectively funded by Alibaba.” That remains an allegation made by a short seller, while Reuters reported that Singaporean records show Alibaba subsidiary Apex Enterprise Solutions provided financing to Speedmatrix. Reuters’ report did not independently verify allegations that Alice Huang was a Chinese intelligence operative, which Beijing denied.
The case’s significance extends beyond the relationship between Alibaba and Megaspeed: Reuters reported that Chinese companies are seeking to rent computing capacity using Nvidia chips in data centers outside China. They fear the case could prompt Washington to tighten restrictions on remote use of advanced processors. The news agency reported that a major Chinese cloud provider internally discussed reserving capacity from Nvidia chips overseas, while smaller artificial intelligence labs contacted data center providers in Southeast Asia. These efforts matter to companies seeking advanced computing capacity, as changes to access rules could affect how they secure that capacity across borders. Reuters sources also said expectations of tighter enforcement had boosted demand in China’s gray market for restricted Nvidia chips and prompted traders and brokers to stockpile them.
Against this backdrop, the Associated Press reported that U.S. officials, according to the New York Times, had concluded that Huang was a Chinese spy recruited to influence Nvidia’s availability of its most advanced chips in China. China’s Foreign Ministry said the accusation was “nothing but a smear against China.” The AP reported that Huang became a director at Singapore-based Megaspeed in 2023, while saying public records later showed her outside the company’s board. Culper, by contrast, issued a report indicating that she remained involved in Megaspeed’s day-to-day operations despite what public records show. The AP quoted Megaspeed as saying there was “no evidence of any violations involving illicit chip transfers or any illegal activities.” Singapore said it was investigating Megaspeed and would not tolerate companies circumventing or violating export controls, adding that Huang herself was not under investigation.
The news also affected Nvidia in an earlier session: the company’s shares fell 4.3% on Monday, November 9, losing $7.97 and wiping about $190 billion from its market value, according to the AP. In a subsequent corporate move, a committee of independent Nvidia board members said it had retained law firm Wachtell, Lipton, Rosen & Katz to conduct a “thorough, independent investigation” into the matter and the company’s relationship with Megaspeed. The AP also reported that a shareholder lawsuit accused Nvidia and its chief executive, Jensen Huang, of misleading investors about the case and the risks to the company’s reputation and business prospects. These are allegations in a lawsuit, not the findings of an investigation or a court ruling. The board review and lawsuit are corporate developments related to the case, while share movements remain distinct by trading session and company.
On the U.S. legislative front, the Remote Access Security Act awaits action in the Senate after the House passed it in January by a vote of 369 to 22, according to Reuters. The bill aims to give the Commerce Department authority to regulate access to advanced chips through data centers outside the United States, the route Chinese companies seeking to reserve computing capacity overseas are monitoring. Reuters said lawmakers’ concerns include the possibility of remote access to advanced chips through those centers. In China, the National Bureau of Statistics’ provisional calendar lists November 16 as the release date for its monthly retail sales report, noting that release dates are preliminary and subject to change. The bureau said monthly national economic performance data are released in November, alongside separate monthly releases covering industrial production and retail sales.