Is Nvidia’s Empire Under Siege — From Inside?

In a rare public clash between two major players in the artificial intelligence arena, Nvidia Corporation has come out swinging against Anthropic, a company it supplies GPUs to, over calls for stricter U.S. export controls on AI chips.

The dispute highlights a rift between companies and a deeper struggle over national security, innovation, and global tech dominance.

Smuggling Chips In Lobsters? Anthropic Says Yes

Anthropic, the Amazon and Google-backed AI lab, made headlines when it said that Chinese smugglers are sneaking U.S. chips into China hidden in “prosthetic baby bumps” and “alongside live lobsters.”

In a blog post, Anthropic called on the U.S. government to tighten export controls, arguing that restricting access to advanced AI chips is key to maintaining America’s edge in the global AI race.

The company said that compute access — essentially, the hardware needed to train AI models — is the key to determining which country will lead the future of artificial intelligence.

Anthropic’s recommendations included lowering export thresholds for Tier 2 countries and ramping up funding for enforcement, all under the Biden-era “AI Diffusion Rule,” set to take effect May 15.

Nvidia Fires Back: Focus on Innovation, Not Fear

Nvidia, the world’s top maker of AI chips, wasn’t having it. In a sharply worded statement, Nvidia dismissed Anthropic’s warnings as exaggerated.

“American firms should focus on innovation and rise to the challenge, rather than tell tall tales that large, heavy, and sensitive electronics are somehow smuggled in ‘baby bumps’ or ‘alongside live lobsters,’” an Nvidia spokesperson said.

Nvidia CEO Jensen Huang also weighed in during a recent visit to Washington, D.C., warning lawmakers that overly strict export restrictions could backfire.

According to Huang, China is “not behind” the U.S. in AI, and companies like Huawei are quickly advancing as global leaders. Huang argued that cutting off the Chinese market could cost U.S. companies billions and give competitors like Huawei even more room to grow.

The Money At Stake: Billions

The timing of the dispute is critical. Just last month, the U.S. government blocked Nvidia from shipping its H20 chip — a product specifically designed for China — resulting in an expected $5.5 billion hit for Nvidia in the first quarter.

Nvidia is now reportedly redesigning chips for Chinese customers like Alibaba, ByteDance, and Tencent to comply with U.S. regulations.

Anthropic’s push for even tighter restrictions could further squeeze Nvidia’s overseas business. But Anthropic says national security should come first, even if it puts pressure on its suppliers.

The Bigger Picture: National Security Vs. Innovation

This showdown between Nvidia and Anthropic isn’t just about one rule or one set of chips. It’s a window into a much larger debate: How does the U.S. secure its position as a global leader in artificial intelligence without stifling its innovators?

As Anthropic put it, maintaining America’s computing advantage through export controls is essential for national security and economic prosperity. Nvidia, on the other hand, argues that innovation, not isolation, is the key to long-term dominance.

That's all for this week! If you found these updates useful, you'll like more from this newsletter. Get deeper dives, hot takes, and all the latest tech news delivered straight to your inbox.