Taiwan's Chip Suppliers Say Nvidia Turmoil Is Unlikely to Derail AI Demand

Taiwan matters more than most to this question. Its chip foundries, packaging and testing houses and server assemblers build most of the hardware Nvidia sells. The island's October exports set another record on the strength of AI servers and chips, and its stock market fell sharply last week as the AI trade sold off. On Monday the Taiex opened higher after Friday's losses and after the National Stabilization Fund was authorised to intervene.

Nvidia's board has opened an independent inquiry, overseen by independent directors with outside legal counsel. It follows reports that foreign intelligence targeted Huang through a relationship with a woman US officials suspected of being a Chinese agent. In an internal memo to staff on Sunday, Huang admitted to an extramarital affair, apologised and pledged to cooperate. Nvidia has said it has no reason to believe national security or company secrets were compromised. Beijing has called the allegation a smear.

An executive at a Taiwanese packaging and testing company, who was not named, told CNA that the long-term outlook for AI was unchanged, although the affair could weigh on the supply chain for about six months. The executive said the United States could not afford to slow its AI development, but expected closer short-term scrutiny and possibly new rules.

An executive at an IC testing firm made a similar case. Taiwanese suppliers have worked with Nvidia for decades, the executive said, and a supply chain like that cannot be rebuilt quickly. The United States has to keep pushing AI or lose market share to competitors.

A third semiconductor executive argued that demand does not depend on Huang. Large cloud providers have committed to more AI infrastructure spending and many companies still need data centre capacity, so the build-out would probably continue even if Nvidia's leadership changed, the executive said.

Chang Chien-yi, president of the Taiwan Institute of Economic Research, also expects no major effect on the AI supply chain. He told CNA the affair could hurt Huang's reputation. Whether China obtained AI servers through unauthorised channels, he said, depends on what the investigation finds. He said many Taiwanese exporters already hold orders for the first half of 2027, and he expects cloud providers to keep raising AI investment next year, though more slowly.

The risk the suppliers describe is political, not commercial. CNA reported that three Republican lawmakers have asked Huang to attend a closed-door meeting on whether high-end chips and AI servers reached China through third countries. Supply chain sources said they are watching for new AI rules from Congress and for US state policies on data centres and power infrastructure.

The calm in Taipei contrasts with the mood elsewhere. Nvidia shares fell about 5% in premarket trading on Monday after Aletheia Capital downgraded the stock. In Seoul, there is concern that Washington could respond with tighter export controls on AI chips, which would affect Samsung and SK hynix as well as Nvidia. Investors' next test comes when Nvidia's board reports what its inquiry has found. The company has not said when that will be.