Nvidia CEO Jensen Huang states that illicit data centers are a futile venture and emphasizes that national security is the top priority.

      Summary: Jensen Huang informed shareholders that national security is the top priority, emphasizing that data centers utilizing smuggled Nvidia chips require reliable support to operate effectively. He stated, “National security comes first,” during a session following the annual stockholder meeting.

      Huang tackled the issue of chip smuggling, asserting that attempts to construct AI data centers with stolen Nvidia hardware would ultimately fail. He pointed out that advanced AI data centers are complex systems needing trusted hardware, software, networking, and ongoing support, labeling the idea of using smuggled equipment as futile.

      He clarified that companies attempting to smuggle Nvidia chips or systems into countries with export bans, like China, would face difficulties in making the hardware operational since Nvidia would not offer support or repairs. He contended that without such a relationship, the systems cannot meet modern AI's operational demands.

      These statements come amid heightened enforcement actions. In March, Wally Liaw, co-founder of Supermicro, was charged with conspiring to smuggle Nvidia-equipped servers worth approximately $2.5 billion into China via a front company in Southeast Asia, employing methods like heat guns to alter serial numbers and staging dummy servers to deceive auditors. Liaw pleaded not guilty, with a trial scheduled for November.

      In addition, Taiwan initiated its first criminal case regarding AI chip smuggling in May, raiding 12 locations and seeking detention orders for three individuals accused of using forged documentation to send Nvidia servers to mainland China. This crackdown has led to a significant increase in grey-market prices for Nvidia’s B300 servers in China, nearly doubling the official US list price.

      Huang’s comments also followed a US government order for Anthropic to halt its most advanced AI models, Fable 5 and Mythos 5, due to national security issues related to a reported jailbreak. Anthropic, which relies on Nvidia chips for training, criticized the action as excessive. This incident highlighted the US government's increasingly assertive stance on sensitive AI technology.

      Nvidia's ties with China have been gradually declining due to export controls imposed since 2022. In fiscal 2026, China, including Hong Kong, contributed about nine percent to the company's revenue, down from 13 percent the previous year. Although the Trump administration approved sales of Nvidia’s H200 chip to selected Chinese firms last year, Huang mentioned that the company has not earned any revenue from these licenses and is uncertain whether China will permit imports.

      On the business front, Huang asserted that the question of AI return on investment “has been answered,” citing the near-tripling of pull requests on GitHub this year due to AI-generated code as tangible proof that AI output drives demand for more computing power.

      Huang stated, “Nvidia systems may not be the cheapest to buy, but Nvidia produces the lowest cost tokens, the highest token throughput, and the most revenues.” The company reported over $96 billion in free cash flow for fiscal 2026 with revenues totaling $216 billion.

      He reiterated Nvidia's plan to return 50 percent of its free cash flow to shareholders via share buybacks and dividends over the coming years. The board had approved an additional $80 billion for buyback authorization in May and increased the quarterly dividend from one cent to 25 cents per share.

      During the meeting, shareholders re-elected all 10 board members, approved the executive compensation plan in an advisory vote, and passed a proposal requiring a simple majority for all shareholder votes. The company also confirmed PricewaterhouseCoopers as its auditor for fiscal 2027.

      Huang's “dead end” narrative aims to assure Washington of Nvidia's commitment to export controls while cautioning customers in regulated markets against purchasing smuggled hardware. Whether this message reaches the intermediaries who have been routing substantial amounts of Nvidia servers through Southeast Asia remains uncertain.