NationGate Holdings Shares Plunge 40% Amid Malaysian Corruption Raid

NationGate Holdings, the sole manufacturing partner of Nvidia in Southeast Asia, experienced a significant decline in its share price this week following a raid by Malaysian authorities on one of its subsidiaries. The Malaysian Anti-Corruption Commission (MACC) conducted the raid as part of an ongoing investigation into scrap metal smuggling. The company disclosed that the raid targeted NationGate Solution, a wholly-owned subsidiary, and that the investigation did not involve any specific board members or senior management. NationGate assured that the raids were not expected to have a significant impact on its finances or operations.

The investigation into scrap metal smuggling is part of a broader crackdown by the MACC, which has identified syndicates operating in five states. These syndicates are suspected of exporting scrap metal to countries such as India and China, falsely reporting them as machinery or other metals to avoid the 15% export tax imposed by the Malaysian government. The estimated tax revenue loss from these activities is substantial, highlighting the severity of the issue.

NationGate, which is ranked No. 243 on the Southeast Asia 500, has seen remarkable growth in recent years. In 2024, the company's sales surged by 720% to reach 5.3 billion Malaysian ringgit, driven largely by the surging growth in its data computing segment. This growth is attributed to NationGate's role as the only company in Southeast Asia that assembles Nvidia’s highly sought-after graphic processing units (GPUs) into AI servers. Nvidia’s GPUs are widely used in high-performance AI applications, positioning NationGate as a key player in the AI industry.

However, the AI boom and the company's association with Nvidia also present risks. In early March, Malaysia and neighboring Singapore faced allegations from the U.S. of being channels for controlled chips to make their way to China. U.S. officials were reportedly interested in whether DeepSeek, a Chinese AI startup, had obtained Nvidia processors it wasn’t supposed to have. Singapore’s Law and Home Affairs Minister K Shanmugam stated that servers containing chips subject to U.S. export controls appeared to have been sent to Malaysia. Malaysia’s Trade Minister Tengku Zafrul Abdul Aziz confirmed that officials were investigating the matter and vowed to take necessary action.

In response to these allegations, Malaysia announced that all exports of high-performance U.S. AI chips would now require permits, and that individuals and companies must notify the government at least 30 days prior to shipping such hardware. NationGate has distanced itself from these investigations, clarifying that it is not involved. Despite these assurances, investors remain cautious, and NationGate’s shares have declined by over 40% year-to-date. The company's future performance will depend on how it navigates these regulatory challenges and maintains its position in the rapidly evolving AI industry.