The swirl of sex-and-spying allegations around Nvidia CEO Jensen Huang is raising a worrying question: Could trouble at the chipmaker spread through the tightly connected financial network Nvidia has built to support the artificial intelligence boom?
Serious problems with Nvidia could do far-reaching economic and financial damage. The company has made hundreds of billions of dollars in financial commitments to other firms to help the industry grow, earning it the nickname the "central bank of AI." The Federal Reserve and other financial institutions are closely watching the AI buildout to monitor for the possibility that an unexpected event could destabilize the global financial system.
Even back in July Fed officials were discussing the possibility of of a "broad-based repricing of assets" in the event of problems in the AI sector.
A rerun of the 2007-2008 financial crisis isn't likely, according to analysts and current and former financial officials. Nvidia isn't "too big to fail in a bank sense at all," said Sheila Bair, a former government regulator who ran the Federal Deposit Insurance Corp. Unlike a troubled bank, Nvidia isn't vulnerable to a sudden loss of confidence and would still produce a product customers want to buy even if something went wrong. And its massive equity gives it a cushion.
But regulators need to watch carefully for exposure by the banks and the wider financial system to Nvidia and other firms like it, Bair said.