Culper Research is short shares of NVIDIA Corp (NASDAQ:NVDA).
NVIDIA (NVDA): The China Problem
We are short Nvidia (“NVDA”, “the Company”). We recognize the stakes. Nvidia holds the single largest market capitalization on the planet, while CEO Jensen Huang has been celebrated as a generationally talented operator. We share the consensus view that AI – for better or worse – will continue to transform society. This is not a bet against AI. We are short Nvidia for one reason: the Company has a significant China problem.
Summary of Culper Research Opinions
Nvidia claims that its business in China went to “zero” after April 2025 U.S. trade restrictions. We believe that in reality, over 20% of Nvidia’s FY 2026 compute revenues remained driven by China – supported both by illegal GPU diversion and Southeast Asian intermediaries.
Nvidia has repeatedly vouched for Megaspeed – its single largest Southeast Asian chip buyer currently under investigation by both U.S. Commerce and Singapore authorities – as “wholly owned and operated by a company based and headquartered outside China, with no China shareholders.” Nvidia has also claimed that it has “repeatedly tested and sampled data centers around the world and found no diversion.” Documents we uncovered, however, suggest that Megaspeed has been secretly financed by Alibaba via a series of apparent shell companies. Tellingly, Nvidia’s lawyered phrasing – that Megaspeed holds no Chinese equity – doesn’t seem to preclude Chinese financing.
Megaspeed’s financial statements reveal that from year-end 2023 to year-end 2024, its balance sheet exploded from just $33 million to $3.0 billion in total liabilities and equity, driven almost entirely by $2.9 billion in “refundable deposits received” from an un-named source. Megaspeed’s financials also show $2.9 billion in “amounts due from subsidiaries” – money that it forwarded onto its operating subsidiaries such as Malaysia-based Speedmatrix.
Malaysian filings reveal that in June 2024 – two months prior to commencing operations – Speedmatrix filed a charge in which it pledged its entire business as collateral to Apex Enterprise Solutions (Singapore). Singapore filings disclose that Apex’s corporate parent is Alibaba, and its sole purpose is stated as “providing procurement activities.” As of March 31, 2025 (latest available), Apex reported over $4.1 billion in prepayments against $4.2 billion in loans payable to Alibaba.
Trade records reveal that from December 2024 through January 2026, Speedmatrix imported $4.6 billion in product, of which $4.0 billion originated from Aivres Systems Inc., an Nvidia Elite OEM compute partner that assembles high-end Nvidia-equipped servers.
Aivres Systems was formerly known as Inspur Systems Inc., but rebranded after its parent, China-based Inspur Group, was placed on the U.S. entity list. Today, Aivres remains one-third owned by the Chinese state – just under 50% restriction thresholds. Aivres has also supplied servers via Indosat to Shanghai’s INF Tech, whose founder is a former Alibaba VP. In March 2026, the WSJ reported that Aivres would supply $2.5 billion in Blackwell chips to a Malaysian operator who would lease the servers to ByteDance. Taken together, it seems to us that Aivres’ business remains, in effect, a China-dedicated supply channel.
Just last month, Bain’s Bridge Data Centres (“BDC”) reportedly dropped Megaspeed as a tenant. BDC declined to cite why. One source we spoke with, however, suggested that BDC found that Megaspeed had been caught using the data center as “a place for Megaspeed to install their dummy servers” and “divert the hardware.”
Nvidia CEO Jensen Huang has not only vouched for Megaspeed, but seems to have quite literally walked alongside Megaspeed at every step, while maintaining an uncomfortably close relationship with Megaspeed’s Alice Huang, a Chinese national. He was first spotted partying with Alice Huang in June 2024 – the same month the Apex/Alibaba pledge was filed. He then dined with Alice Huang in Taiwan in May 2025 – just weeks after the news of U.S. trade restrictions. Finally, per one current Megaspeed employee, Jensen visits Megaspeed-linked data centers “every few months” and “every single time” he visits, he is accompanied by representatives from Alibaba. The Megaspeed employee characterized their relationship with Jensen as “very close”, corroborating another former Nvidia employee’s suggestion to us that many Nvidia employees wondered if there was a special relationship. The same employee added that, in contrast to public reporting suggesting otherwise, Alice Huang is “actually still our boss.”
In March 2026, the DoJ indicted three individuals tied to Supermicro Computer (SMCI), including co-founder Wally Liaw, for allegedly smuggling $2.5 billion of Nvidia-powered servers into China via a Southeast Asian pass-through entity identified only as “Company-1.” Days ago, Bloomberg reported that “Company-1” is OBON Corp. (“OBON” i.e., “One Belt One Network”), a conclusion we agree with. We think there’s far more to the story, however.
We believe OBON is affiliated with Megaspeed, and that, in the words of one former high-level Nvidia employee we spoke with, “Megaspeed is just the tip of the iceberg.” The March 2026 indictment alleged $2.5 billion in smuggling via a single corridor (Supermicro to OBON) – our research suggests this corridor is just one of many in what is a complex and far-flung operation involving multiple additional Nvidia OEMs, partners, and intermediaries.
In October 2025, Nvidia partner YTL AI Cloud opened a $4.3 billion data center in Johor, Malaysia, housing Blackwell-equipped servers. A current Megaspeed employee told us that Megaspeed is “one of the most important customers” for YTL, but that the parties conceal the relationship, saying, “Megaspeed is able to get the supply of the GPUs and supply to the Chinese companies. They don’t want the media attention so that it doesn’t disrupt their business plans in the data centers.”
Nvidia Elite OEM partner Giga Computing has exported over $500 million in H200 and Blackwell-equipped servers to Speedmatrix and to Novagate Cloud Bhd. Sdn. (“Novagate”). Novagate appears to be another Megaspeed offshoot – its website is nearly identical to Megaspeed’s website, and one of its directors shares an address with Megaspeed’s corporate headquarters. Novagate’s Malaysian subsidiary was incorporated on April 11, 2025 – two days after trade restrictions were announced.
Numerous experts told us that Nvidia has long possessed the means to detect diversion, including pre-sale signposts and standard KYC checks – e.g., recently-incorporated customers suddenly placing large orders and sales without warranties – as well as post-sale technical indicators – e.g., server IP data, mismatched server latency times, and servers “going dark” without explanation.
Analysts treat China as potential upside. We believe it’s the exact opposite. Nvidia’s China business – which the Company told investors went to zero a year ago – is now actually going to zero as Beijing’s late 2025 and early 2026 policies have, for example, blocked Nvidia imports in favor of its own domestic alternatives. Beijing’s stance appears hardline. Our review of trade records suggests substantial declines in CY Q1 2026 shipments, while mainland operators tell us that there are now “very few orders” in China, presenting “a huge blow to Nvidia financially.” Nvidia now faces a massive air gap in this year’s estimates. We think this also explains Jensen’s recent behavior on the Dwarkesh Patel podcast, particularly when presented with questions surrounding China.
We are short Nvidia and think shares are headed lower.
Introduction: Nvidia Claims “We Are 100% Out of China” Yet We Believe China Drove a Significant Portion of FY 2026 Compute Revenues
In April 2025, the U.S. tightened restrictions so as to effectively ban all Nvidia GPU sales to China, including sales to “companies headquartered or with an ultimate parent therein.”1 Nvidia took a $5.5 billion write-down on its H20 chip inventory and disclosed that export controls would lead to a loss of “approximately $8 billion” in anticipated H20 revenues for FY Q2 2026. Since that time, Nvidia has claimed to hold zero compute share in China. For example in October 2025, speaking at a Citadel Securities conference, CEO Huang stated of its compute business that, “at the moment, we are 100% out of China… we went from 95% market share to 0%.”2 Similarly in an interview just days ago, Jensen again claimed that, “in China, we have now dropped to zero.”
Even more so, CEO Huang has repeatedly claimed to find zero evidence of any chip diversion to China. Speaking to Bloomberg in May 2025, he claimed, “There’s no evidence of any AI chip diversion. These are massive systems. The Grace Blackwell system is nearly two tons, and so you’re not going to be putting that in your pocket or your backpack anytime soon.”
In a November 2025 Bloomberg interview, Huang again claimed, “Of course, over the years, people have speculated about diversion. We’ve chased down every single concern. And we’ve repeatedly tested and sampled data centers around the world and found no diversion.”
Source: Bloomberg
We believe that despite essentially no direct compute sales into China after April 2025, Nvidia continued to service Chinese demand via sales to non-restricted intermediaries and diversion.
Indeed, Jensen has mocked the very notion of diversion as physically impossible, only for the March 2026 Supermicro indictment to detail a staggering $2.5 billion diverted through a single OEM/pass-through relationship.4 Investors today, however, still hold blind faith in Jensen when he claims that Nvidia’s China compute business went to zero – suggesting that improved trade relations unlocks upside for Nvidia. That blind faith is misplaced.
Historically, analysts have recognized that Nvidia’s pre-restriction China exposure was meaningful. For example, in mid-2025, DA Davidson analyst Gil Luria estimated that “at least 25%” of Nvidia chips and “as much as 40%” of revenues ultimately reflect Chinese demand. In March 2026, Wells Fargo flagged that “NVDA has previously noted that China accounted for 20-25% of total Data Center revenue.”
One former Nvidia Director-level employee we spoke with estimated that “20% to 40%” of Nvidia’s data center business remained functionally Chinese even after the April 2025 restrictions took effect – China didn’t go to zero; it just took a new shape.5
On intermediaries: “The reality is that China is still just using it… Even if the servers don’t go to China, they go somewhere in Europe or Southeast Asia, and they just rent to China, and at the end of the day, Nvidia still wins.”
On smuggling: “We send these racks to Singapore – that’s the most common one. A lot of these companies they incorporate there. They don’t say they’re Nvidia servers, they just say that it’s IT equipment.”
On Nvidia’s continued exposure: “The China market brings in about 20% to 40% of revenues… They’ll never disclose the numbers, of course, but it’s closer to 40%. And remember, they’ve been doing this for years. The way the business works – and I know because I used to go to Singapore a lot – they have their own rules. They will just take the GPUs and say it’s a phone. Sure, you can put the auditors, but we don’t have enough police in the world to police it.”
Read the full report here by Culper Research
