Data centers made of smuggled parts are a ‘dead end’

Nvidia CEO Jensen Huang told shareholders on Wednesday that the company would prioritize American interests if a commercial opportunity conflicts with U.S. national security.

““National security comes first,” Huang said at a hearing shortly after the end of the company’s annual shareholder meeting.

He added that if a company wanted to smuggle Nvidia’s chips or systems into countries with export restrictions (like China), they would have difficulty making it work because Nvidia does not provide support or repairs.

“Advanced AI data centers are massive integrated systems that require reliable hardware, software, networking and ongoing support,” Huang said. “Trying to bundle data centers with some contraband is a dead end.”

Huang’s remarks come as Washington regulators and the Trump administration are increasingly wary that exporting AI software and hardware to China and other countries is a threat to national security.

Earlier this month, Anthropic, which uses Nvidia chips, shut down Fable 5 and Mythos 5 after the US government ordered it to disable access to its most advanced models.

Nvidia’s chips have been subject to export controls since 2022, forcing the company to produce China-specific chips for the region that meet the US government’s criteria. But last year, the US approved the company’s H200 chip (the same model used by US companies) for export to the region.

Huang said the US government has approved these licenses, but Nvidia has not yet earned any revenue from the chips and he does not know whether Nvidia will allow imports of China’s products. About 9% of Nvidia’s fiscal 2026 revenue came from China, including Hong Kong; This rate is smaller than in 2025 and 2024.

The question of AI’s return on investment has been “answered,” Huang told shareholders during the meeting.

He said that when AI output is useful, such as generating code, it becomes profitable to run an Nvidia system to generate tokens or AI output, meaning companies need more computing power. He noted that GitHub has nearly tripled pull requests this year due to AI.

“Nvidia systems may not be the cheapest to buy, but Nvidia produces the lowest-cost tokens, the highest token yield, and the most revenue,” Huang said.

He reiterated that Nvidia plans to return 50% of the company’s free cash flow to investors through share buybacks and dividends over the next few years.

Nvidia generated over $96 billion in free cash flow in fiscal 2026.

“Nvidia offers investors a unique combination of exceptional growth, strong margins, free cash flow execution and increasing returns on capital,” Huang said.

At the annual meeting, shareholders approved the company’s executive compensation plan in an advisory capacity and re-elected all 10 board members. A proposal by an outside shareholder to amend the company’s bylaws so that the votes of all shareholders are passed by a simple majority.