Jensen Huang’s resignation, combined with the results of the recent Congressional elections, could make this a watershed in U.S. business-government relations, swinging the pendulum back toward greater regulation and greater separation of finance from politics.
Corruption topped the list of issues motivating voters in the midterm elections, where Democrats won overwhelming victories nationwide, according to a CNBC voter poll. It found that 90% perceived corruption as an important or major issue in their voting decisions, one point higher than the cost of living.
When voters were asked which political party would best address corruption issues, Democrats led Republicans 37% to 30%, but a sizable 32% said neither party had the same answer.
It’s impossible to know exactly what voters mean when they say corruption, but there are indications that it has to do with the relationship between government and business. The CNBC National Economic Survey, conducted two weeks before the election, asked respondents whether elected officials, including the president and members of Congress, should personally own or trade stocks in companies that contract with the federal government. An overwhelming 93% said it should not be allowed. Similarly, a bipartisan 89% opposed the president’s family receiving government contracts.
Bottom line: The very close relationship between business and government has existed under both political parties, but it has come to the forefront openly and brazenly in President Trump’s second administration, and is now a major issue for voters.
The yellow incident includes all of that. Nvidia, along with several other large companies, made a large donation to the presidential banquet hall. Meanwhile, there are also allegations that the administration failed to take action despite being informed of possible illegal sales of Nvidia chips to China. Perhaps the president ignored warnings from within his administration that Hwang was having an affair with a woman suspected of being a possible Chinese spy, and instead took Hwang on a state visit to China, giving him a say in U.S. chip export policy.
The Trump era saw the virtual birth of the CEO Statesman. Hwang and other tech executives surrounded the president on trips abroad, Jared Kushner and Steve Witkoff negotiated with Russia, and Elon Musk decided to fire the federal government.
Does the Yellow Incident mean the end of that phenomenon?
Sen. Elizabeth Warren, D-Mass., was quick to signal that the new Congress was prepared to get tough on tech executives.
“It’s clear that the American people cannot rely on Big Tech billionaire CEOs to put national security above profit. That’s why Congress must pass the AI Surveillance Act and other bipartisan legislation to keep America’s advanced AI technology out of Chinese hands.”
The magnitude of Hwang’s downfall cannot be overstated. Imagine JPMorgan resigning, or Jack Welch or Steve Jobs or Tim Cook resigning. Few people in the era of the AI boom have straddled the pinnacle of political and corporate power as Hwang has.
This occurred during a period of massive increase in wealth among elites, which helped to shake faith in capitalism. According to a CNBC voter poll, 56% have a strong or somewhat favorable opinion of capitalism, 32% have an unfavorable opinion and 12% don’t know.
But these numbers are overwhelmingly driven by older Americans. Young Americans between the ages of 18 and 34 have extremely negative opinions. People between the ages of 35 and 49 have a favorable view of capitalism, by just 46% to 41%.
What does this mean for your business?
First, it could lead to a return to a more traditional separation of business and politics, where business loses a direct say in policy. But this could be the beginning of a more significant change.
After the Great Financial Crisis, the banking system was placed under such strict regulations, many of which still exist to this day, that one commentator said the banking system was “under control in all but name.” It can also be traced back to more extreme measures taken when the public was deeply dissatisfied with business, to the backlash of the robber baron era when trusts failed, and the aftermath of the Great Depression, when governments imposed tighter regulations on banks and Wall Street and gave more power to labor unions.
Even if Democrats gain significant seats in both chambers, their ability to overturn the president’s decisions with a veto-proof majority will be limited. But senior government officials themselves may decide that it is no longer a good idea to be seen as too cozy with the White House. And some Republicans, particularly in battleground states, may read the shifting electoral winds and side with Democrats on some of the most populist issues, like data centers, the environment, and even regulation.
Ironically, President Trump was committed to particularly strong deregulatory policies, which businesses welcomed under the Biden administration as a break from the shackles of overregulation. With potential support from the public and an overwhelmingly Democratic Congress, the pendulum may be about to swing in the other direction.
