Nvidia Owes It To Shareholders To Sell To Its Most Capable Customers

Rubber was oil before oil. As Edmund Morris wrote in his biography of Thomas Edison, rubber was “a raw material essential enough to provoke armed conflict.” How things change.

Consider a recent Wall Street Journal editorial about Nvidia’s H200 chips, and that asked why President Trump would “give away one of America’s chief technological advantages to an adversary and its chief economic competitor?” The same editorial page that has for so long enlightened readers about the genius of open lanes of trade disdains Trump’s decision to allow Nvidia to sell its chips in China. The editorial didn’t sound very Wall Street Journal.

For one, it implies that the editorialists know what market inputs will be coveted in the future. See rubber while contemplating Nvidia CEO Jensen Huang’s past observation that a failure to constantly evolve means Nvidia “will be commoditized out of business.” Translated, the same Nvidia chips the Journal’s editorialists want to restrict the sale of will soon enough be yesterday’s news no matter Nvidia’s mix of customers.

Next, the editorialists at the Journal would never recommend to Trump and his administration that they demand Nvidia cease selling its chips altogether, but what’s easily forgotten is that neither Nvidia, nor China, nor the U.S. can control the final destination of any good sold. Which answers the Journal’s worry about Nvidia allegedly “giving away” its technology to adversaries. Technological revelations are an effect of sales. As longtime Nvidia employee Dwight Diercks once put it, “Everyone takes a look at their competitors’ hardware and how it works. It’s not even black ops. We just do it.”

After which, if you’re producing you’re by definition trading with the whole world no matter the desires of legislators. That’s why trade between American and German producers continued via Scandinavian countries during WWI despite the U.S.’s embargo placed on Germany, it’s why U.S. consumption of “Arab oil” continued unabated despite the embargo in 1973, and it’s why Nvidia chips will continue to find their way to China, and be analyzed by China-based competitors regardless of efforts made by Washington to control who “wins” AI.

The Journal asserts that China sales by Nvidia mean “there is less ‘compute,’ as the techies say, for U.S. firms, especially startups.” By that measure, there will be fewer American “hits” if noted songwriters Bob Dylan, Joni Mitchell and Paul Simon aren’t required to place their songs with starving U.S. musicians. But just as songwriters must think hard about who will best represent their work, so must innovative businesses with shareholders to please choose their customers wisely.

Translated, the “win” is in the best project, not the country origin of the project. The Journal’s editorialists know why: when trading lanes are open, it’s as though everything is made locally.

It’s a reminder that what’s good for Nvidia is great for the world. Put another way, is China hurt because Cupertino, CA-based Apple sells a fifth of its iPhones in China? Does the ubiquity of McDonald’s and Starbucks stores in China signal domination from Chicago and Seattle, or Chinese customers who worship Americana?

Words won’t be wasted answering the above questions. Precisely because China is so AI competitive, the U.S. and the world will be much better off the more that the business best of the U.S. and China work together. That trade makes the world a safer place just adds to the many reasons Nvidia should be free to sell into China, all the while raising more puzzling questions about why an editorial page long associated with “Free People, Free Markets” disagrees.