Nvidia's CEO Jensen Huang states that illicit data centers are futile and emphasizes the priority of national security.

      TL;DR: Jensen Huang informed shareholders that national security takes precedence and that data centers constructed with smuggled Nvidia chips cannot function without support.

      Nvidia CEO Jensen Huang stated to shareholders on Wednesday that the company would prioritize U.S. interests if any commercial opportunity conflicted with national security. "National security comes first," Huang remarked in a session following the conclusion of the company’s annual stockholder meeting.

      Huang directly tackled the issue of chip smuggling, asserting that attempts to build AI data centers using diverted Nvidia hardware would fail. He noted, “Advanced AI data centers are massive integrated systems that require trusted hardware, software, networking, and continuing support,” describing the idea of assembling data centers from smuggled components as a futile endeavor.

      His message was clear. Huang indicated that companies looking to smuggle Nvidia chips or systems into nations with export restrictions, such as China, would face significant challenges in getting the hardware operational, as Nvidia would not offer support or repairs. He argued that without this ongoing relationship, the systems cannot meet the demands of modern AI at scale.

      These comments come amid increasing enforcement actions. Supermicro co-founder Wally Liaw was charged in March for his role in conspiring to smuggle approximately $2.5 billion worth of Nvidia-powered servers to China via a front company in Southeast Asia, utilizing heat guns to alter serial numbers and staging dummy servers to deceive auditors. Liaw has pleaded not guilty, with the trial scheduled for November.

      In May, Taiwan initiated its first criminal case against AI chip smuggling, conducting raids at 12 locations and seeking detention orders for three individuals accused of using forged documents to send Nvidia servers to mainland China. This crackdown has led to a surge in the grey-market prices for Nvidia’s B300 servers in China, reaching about one million dollars, nearly double the U.S. list price.

      Huang's remarks also followed the U.S. government's directive for Anthropic to discontinue its most powerful AI models, Fable 5 and Mythos 5, citing national security concerns over a purported jailbreak. Anthropic, which relies on Nvidia chips for training, described the action as excessive. This incident highlighted the U.S. administration's increasingly assertive stance regarding sensitive AI technology.

      Nvidia's ties with China have been gradually diminishing due to export controls that began in 2022. Only nine percent of the company’s fiscal 2026 revenue derived from China, including Hong Kong, down from 13 percent the previous year. Although the Trump administration approved sales of Nvidia’s H200 chip to certain Chinese firms last year, Huang informed shareholders that the company has not earned any revenue from those licenses and is uncertain whether China will permit imports.

      On the business front, Huang asserted that the question of return on investment for AI "has been answered." He cited GitHub, where pull requests nearly tripled this year due to AI-generated code, as proof that productive AI outcomes directly translate to greater demand for computing power.

      "Nvidia systems may not be the cheapest to acquire, but Nvidia generates the lowest-cost tokens, the highest token throughput, and the most revenues," Huang added. The company reported over $96 billion in free cash flow for fiscal 2026, with a revenue of $216 billion.

      Huang reiterated Nvidia's commitment to returning 50 percent of its free cash flow to investors through share repurchases and dividends in the coming years. The board approved an additional $80 billion in 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 through an advisory vote, and passed an outside proposal requiring that all shareholder votes be decided by a simple majority. The company also ratified PricewaterhouseCoopers as its auditor for fiscal 2027.

      The "dead end" characterization is strategic. Huang is reassuring Washington of Nvidia's serious stance on export controls while informing customers in restricted markets that acquiring smuggled hardware is a futile endeavor. Whether this message effectively reaches the brokers and intermediaries involved in routing billions of dollars of Nvidia servers through Southeast Asia remains to be seen.