Here is a sales problem. You sell a product whose value nobody can see until the day they really needed it, and by then it’s too late to buy. “It takes a disaster for people to realize that a little bit of training could have mitigated the risk,” Michele Rigby Assad, a former undercover CIA officer who now teaches companies to spot foreign intelligence operations, told Business Insider. Assad was at the CIA from 2002 to 2012, with overseas postings in counterterrorism and counterintelligence. These days she works as a corporate counterintelligence trainer and security consultant, including on Chinese intelligence activity in Florida.
The disaster she has in mind is Nvidia’s. On Sunday the company’s board announced an independent investigation following “recent reporting that founder and CEO Jensen Huang has been the target of a foreign intelligence effort.” In an email to staff, Huang said he had an affair with the woman involved, Alice Huang (no relation), a former Chinese TV reporter who went on to become a senior executive at Megaspeed, a Singapore-based data center company and one of Nvidia’s biggest customers in Southeast Asia. U.S. intelligence reportedly concluded that China’s Ministry of State Security recruited her to gather information on him. The board says it has “no reason to believe that either national security or NVIDIA secrets were compromised.” Nvidia has not said that Huang shared company information, or that Alice Huang took part in an intelligence operation. China has denied the espionage allegations. Meanwhile the board has hired a former prosecutor to look into it, and Congress wants Huang to explain.
Assad doesn’t weigh the evidence in Nvidia’s case or say what Huang knew. Her point is more general. Leaders of strategically important companies, she said, tend to underestimate how personal relationships can be exploited for intelligence purposes. Given Nvidia’s place at the centre of the U.S.-China AI fight, reports that Huang might have been targeted didn’t surprise her.
Make or steal
The economic logic is simple enough that you could put it in a spreadsheet:
If you have products that are of interest to the Chinese and you’ve spent millions or billions of dollars developing that product, you are a target. It’s so much easier for the Chinese to steal those secrets, product designs, etc. than it is to spend billions of dollars trying to engineer what you’ve already developed.
That is a classic make-or-buy decision, except the cheapest way to “buy” is to take it. And the more you spend on R&D, the more stealing your work pays. Your research budget doubles as a measure of how much someone else would like to have it. A company that boasts about spending billions on a chip is, in effect, publishing the bounty.
The government has said this for years. In July 2020 the then FBI director, Christopher Wray, said the bureau was opening a new China-related counterintelligence case about every 10 hours, and that almost half of its nearly 5,000 active counterintelligence cases were China-related. One case every 10 hours comes to about 876 a year. This year, the FBI says its China program has helped facilitate 62 removals of foreign intelligence threats. In September, Assad told Business Insider there are “far more Chinese operations going on against us in the United States” than there are FBI agents to chase them. So the bureau isn’t going to do your security for you.
It feels like consulting
The method Assad describes is interesting because nothing about it feels like espionage. “Oftentimes experts are invited to speak or give a presentation at a conference in China,” she said. “Then, Chinese contacts who develop a friendship with you, will start asking you for reports/insights that they pay you for.” The requests keep coming, and they get more sensitive over time. “People tend to get caught up in the ease with which they get paid for work that feels natural or with minimal risk,” she said. “They identify your vulnerabilities, and they play on those weaknesses.”
That’s the clever part. To the expert it feels like paid speaking work or a consulting gig, the kind of thing senior engineers are offered all the time. Nobody feels like they’re being recruited. It feels like they’re finally being paid what their insight is worth. Which vulnerability gets used depends on the target: money, or, Assad said, a decision to “insert a honeytrap into your social circle if you’re lonely, feel unappreciated, etc.” Her summary: “The use of honeypots in intelligence is a tale as old as time.”
The FBI’s own guidance says the warning signs look like normal business: a “too perfect” investor, recruiter or customer request, a new hire asking for odd access, a friendly contact who slowly wants more. That’s awkward for a chip company, because a too-perfect customer is also what the sales team is paid to find. Megaspeed was set to buy $2 billion of Nvidia AI technology over the next year, according to CNBC. Separately, it has faced scrutiny, including from Commerce Department officials, over whether it helped Chinese customers get advanced chips restricted by U.S. export controls. Megaspeed denies wrongdoing. Nvidia says it found no evidence that Megaspeed illegally transferred its products.
No takers
Assad thinks companies in sensitive industries get far too little training on this, and she points to Florida’s Space Coast, where engineers work on expensive classified development projects. She says she and her husband once watched people in a Cocoa Beach bar whom they believed were Chinese operatives “working the room,” using tactics she recognized from her own time overseas. Business Insider hasn’t independently verified that. “We have engineers and people involved in secret developmental efforts that cost billions of dollars for our companies,” she said. “And the Chinese have operatives crawling up and down.” A 2023 federal advisory, reported by MarketWatch, warned that foreign intelligence services were after sensitive technology and data from commercial space companies, including SpaceX and Blue Origin.
Companies need to “train ourselves out of the optimism bias that causes us to put on rose-colored glasses and not see what’s happening in front of our faces,” she said, and counterintelligence training for the private sector “should be a priority.”
She has offered free training to companies and business networks in the region. Nobody has taken her up on it. The price was zero and demand was still zero. Nvidia’s share price this week is now the most expensive advertisement the product has ever had.