BREAKINGVIEWS-Nvidia-Foxconn bromance raises awkward questions

By Robyn Mak

HONG KONG, May 23 (Reuters Breakingviews) - Jensanity has descended on Taipei – and the feeling may be mutual. The term, used to describe how Nvidia NVDA.O boss Jensen Huang is fawned over like a rockstar, was on full display this week while he was in the city for its annual Computex trade show. The $3 trillion tech company's CEO, an American citizen born in Taiwan, reciprocated, spending much of his time talking up the island's indispensable role in global supply chains and artificial intelligence. He also heaped praise on 350 or so local partners. But Nvidia's burgeoning alliance with one of those, Foxconn 2317.TW, may start attracting unwanted attention from officials in Beijing and Washington.

Nvidia already counts Foxconn, formally known as Hon Hai Precision, as a major supplier for its flagship GB200 and GB300 AI servers used in data centres worldwide. The $70 billion contract manufacturer led by Young Liu has bet heavily on cloud computing and networking products as a way to lessen its reliance on top customer Apple AAPL.O; earlier this year, Liu even stated that revenue from servers would surpass that of iPhones "within two years".

Those ties are set to strengthen. On Monday, the two companies announced they will jointly build a giant AI supercomputer in Taiwan alongside the government and chipmaker TSMC 2330.TW. Moreover, Liu took the stage to spotlight Nvidia's nascent software, Omniverse, which allows manufacturers to create 3D digital replicas of factories. This, according to Liu, gives Foxconn the wherewithal to plan, stress-test and simulate production lines using AI before deploying them in the real world, for instance. Another promising feature is that companies can train robots using these simulations. For Huang, having the world's largest electronics manufacturer as an early adopter is a powerful proof of concept for Nvidia's ambitions in this sector; he estimates there are currently $5 trillion worth of factories globally under construction.

Geopolitics, though, cast a shadow. Foxconn may be from Taiwan, a democratic island which Beijing claims sovereignty over. But it has a huge manufacturing presence in mainland China, which is prioritising self-sufficiency in areas including AI, semiconductors and robotics – capabilities that Washington deems a national security threat. U.S. President Donald Trump's administration has also stepped up scrutiny of U.S.-Chinese collaboration: Apple's partnership with e-commerce group Alibaba 9988.HK, for instance, has raised alarm in Washington, partly due to fears that the deal would help a Chinese company improve its AI capabilities, the New York Times reported this week, citing sources. Given an estimated three-quarters of Foxconn's manufacturing capacity is in China, U.S. officials may want more clarity on what kind of software and hardware Nvidia is offering.

Huang and Liu's bromance looks like the start of a lucrative tech alliance, but it might raise some awkward questions down the line.

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CONTEXT NEWS

Nvidia CEO Jensen Huang said on May 19 that the company will build a giant AI supercomputer in Taiwan in partnership with Foxconn – formally known as Hon Hai Precision – TSMC and the government. Speaking at Taipei's annual Computex trade show, Huang also disclosed the company's plan to build a Taiwan headquarters in the northern suburbs of Taipei, dubbed Nvidia Constellation.